Employer contributions on behalf of FERS employees and transfers into the TSP of money from retirement savings programs of prior employers do not count against investment limits. Image: Things/Shutterstock.com
By: FEDweek StaffThe IRS has raised the standard investment limit for the TSP and other 401(k) type retirement savings plans to $22,500 for 2023, up from the current $20,500.
That “elective deferral limit” is the total investment allowed in traditional balances (pre-tax on investment, taxable on withdrawal), Roth balances (after-tax on investment, tax-free on withdrawal if certain conditions are met) or both, for those with both types of balance.
The separate “catch-up contribution” limit will increase by $1,000 to $7,500 in 2023. That is an additional amount above the standard limit allowed for those who are age 50 or older in a year. For those eligible to make catch-up contributions, any investments beyond the standard limit “spill over”—they are automatically designated as catch-up contributions, up to that limit.
Employer contributions on behalf of FERS employees and transfers into the TSP of money from retirement savings programs of prior employers do not count against either limit.
Separately, the IRS raised the maximum that federal employees (but not retirees) can put in health care flexible spending accounts from $2,850 to $3,050 in 2023; the maximum that can be carried forward in such accounts from 2023 into 2024 will be $610, up from the $570 that can be carried from 2022 into 2023. The individual must have an account for the following year to be eligible.
The IRS also has raised the maximum tax-free amount allowable under the public transit subsidy program from $280 to $300 a month. Policies vary among agencies and among locations within agencies, in some cases as set in labor-management contracts. Some pay a subsidy in the form of passes or vouchers purchased by the agency and others allow employees to reduce their pre-tax income by an amount equal to their transit or van pool expenses up to the maximum. The much-less-used tax-free benefit for parking at a transit lot is rising in the same way.
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See also,
January Retirement COLA Set: 8.7 Percent for CSRS, 7.7 Percent for FERS
The Government Pension Offset and Social Security
Windfall Elimination Provision Getting Attention in Congress
Why Federal Employees Quit: It’s Not All about Pay
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FERS Retirement Planning Bundle: 2022 FERS Guide & TSP Handbook
