Special Considerations for ‘Catch-Up’ Investors

Individuals eligible to make “catch-up” contributions under a new TSP feature beginning next month for those age 50 and older this year must already be investing at either the maximum TSP contribution percentage or an amount which will result in his or her reaching the dollar limit by the end of the year. Thus, those persons have only until the end of the open season to adjust their regular contributions to the maximum, if they aren’t already investing the maximum. Also, some highly paid FERS investors have been investing at a dollar amount that would bring them up to the dollar cap before the end of the calendar year, on the mistaken belief that they could continue investing beyond that and designate the money as catch-up contributing (catch-up contributions can be made only by filing a separate form, the TSP-1-C, and results in a separate deduction from salary). Those investors will want to make sure they adjust their contributions so that they don’t hit the dollar limit until the end of the calendar year. Otherwise, their contributions will shut off once they hit the cap and so will the matching government contributions.