FEDweek

What’s the Difference Between a Contribution Allocation and an Interfund Transfer?

Q.  What’s the Difference Between a Contribution Allocation and an Interfund Transfer?

A.  It’s easy to see how individuals get confused about these two methods of allocating their investments within the Thrift Savings Plan.  The biggest difference is that these methods deal with different money.

CONTRIBUTION ALLOCATIONS:

A contribution allocation deals with money that you are contributing to the TSP.  When you make a contribution allocation, you can change both the amount of money you are contributing and how those contributions will be allocated among the TSP funds.

Contribution allocations are done through your agency’s payroll interface (e.g., EBIS, Employee Express, etc.)

Contribution allocations apply to both your Traditional and Roth TSP balances.

Though contributions for the elective deferral amount ($18,000 in 2016) carry over from year to year, contribution allocations that apply to the “catch-up” contribution that those 50 and older are allowed to make, do not carry over and a new allocation must be made for each year.

There is no restriction on the number of contribution allocation changes you may make, but in reality, they can only be effective once a pay period.

INTERFUND TRANSFERS:

An interfund transfer deals with money that is already invested in the TSP.  When you make an interfund transfer, you are re-allocating your existing account among the TSP funds.

Interfund transfers are done on the TSP website.

Interfund transfers apply to both your Traditional and Roth TSP balances.

You are allowed to make two interfund transfers per month, though there is an exception.  After you have made two transfers in a month, you are still allowed to make another transfer if, and only if, the subsequent transfer(s) are moving money into the G fund.