The interest rate for capturing service credit toward FERS and CSRS in certain situations will rise in 2025 to 4.375 % from 3.75 %. Image: Irina Gutyryak/Shutterstock.com
By: FEDweek StaffAmong key dollar figures of interest to federal employees changing for 2025 are:
* The standard investment maximum investment limit for TSP investors is rising from the current $23,000 to $23,500; that is the “elective deferral limit” applying in the TSP along with other similar tax-favored retirement savings plans, and applies to the combination of traditional pre-tax investing and Roth after-tax investing, for those making both types.
* A separate general “catch-up contribution” limit for TSP investors who are—or who will be by the end of a year—age 50 or older during a calendar year will remain $7,500; that also applies to a combination of traditional and Roth investing, for those making both types. Through 2024, the same limit has applied to all eligible persons, but effective in 2025, those age 60, 61, 62, or 63 in a given year have a higher limit of 150 percent of the standard limit, making the new, higher, limit $11,250 for 2025.
* The maximum that can be carried forward from 2025 into 2026 in health care accounts will be $660, up from the $640 that can be carried from 2024 into 2025. The individual must have an account for the following year to be eligible. In dependent care accounts, there is a 10-week grace period for using unspent money carried from one year to the next.
* The maximum tax-free amount allowable under the public transit subsidy program—formally, the “qualified transportation fringe benefit”—is rising from $315 to $325 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.
* The interest rate charged on payments needed to capture credit for service toward federal retirement benefits in certain situations will rise in calendar year 2025 to 4.375 percent from 2024’s 3.75 percent. 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, as for payments to capture credit toward federal retirement for military service time.
* That figure also is the interest rate paid on “voluntary contribution” retirement savings program, which allows CSRS (but not FERS) employees to set aside money in tax-deferred accounts that can be withdrawn as a lump-sum or turned into additional annuity payments at retirement.
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See also,
How to Handle Taxes Owed on TSP Roth Conversions? Use a Ladder
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
