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By: FEDweek StaffThe “elective deferral limit” cap on allowable investments in the TSP—along with other similar tax-favored retirement savings plans—will increase from the current $23,500 to $24,500 in 2026, the IRS has announced.
The standard “catch-up contribution” limit for investors who are—or who will be by the end of the year—age 50 or older during a calendar year also will rise, from $7,500 to $8,000. Up to this year, the same limit applied to all eligible persons regardless of age beyond 49, but now those age 60, 61, 62, or 63 in a given year have a higher limit, which will remain $11,250 for 2026.
In each case, the limits apply to the combination of traditional pre-tax investing and Roth after-tax investing, for those making both types.
Also, for those who invest in two TSP accounts (civilian and uniformed services) during a year, the combined investments into all such plans cannot exceed the IRS limits. Similarly, the investments are combined for those who invest in the TSP and another tax-advantaged plan during a year—such as the 401(k) plan of a private sector employer before or after government employment.
However, agency contributions into the accounts of FERS employees do not count against the limits, nor do rollovers into a TSP account from retirement savings plans of prior employers.
For high investing FERS employees – now’s the time to review your investment rates to make sure you’re getting the full government match through the end of the year. FERS investors should take care to structure their investments so that they can continue investing at least 5 percent of salary, the amount that produces the maximum government contribution, through every pay period of the year. If they hit the dollar cap before that, their own investments will shut off until next year and so will government matching contributions worth up to 4 percent of salary.
Service credit rate change – The interest rate charged on payments needed to capture credit for service toward federal retirement benefits in certain situations will decrease in calendar year 2026 to 4.25 percent from this year’s 4.375 percent – seemingly small but very impactful.
The rate applies to deposits and redeposits into the federal employee retirement fund to get credit for service for which no retirement contributions were taken or for which refunds were received at a break in service. It applies as well as for payments to capture credit toward federal retirement for military service time.
While the decrease may seem slight, it can significantly affect the final cost of a service credit, particularly for employees with extended breaks in service or those planning to buy back several years of military time.
COLAs – A federal retirement COLA will be paid in January of 2.8 percent for those retired under CSRS and 2 percent for those retired under FERS who are eligible for COLAs.
Social Security – Several key figures are increasing for 2026 in the Social Security program affecting both current employees and retirees. For the former group, the 6.2 percent Social Security payroll tax will apply on up to $184,500 of earnings, up from $176,100. For FERS employees, that tax cuts off at that threshold and from there on they pay only the civil service retirement contribution (which is 0.8, 3.1 or 4.4 percent, depending on when they were hired).
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See also,
Calculating Service Credit for Sick Leave At Retirement
FERS Supplement vs The 10% Pension Bonus
How Your FERS, Social Security and TSP Payments Get Taxed
Where Should I Put My TSP in Retirement
