The midpoint of the year is a common time for FERS employees to conduct a review to make sure they won’t lose government contributions to their TSP accounts due to hitting the annual investment dollar limit too early. The cap this year is $19,500 (a combined limit for both traditional pre-tax TSP investing and after-tax Roth investing, for those making both types).
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.
Some employees invest at high rates early in the year in order to get money in the TSP sooner and take advantage of potential tax-advantaged growth for longer periods—that is, “front-loading” their investments. Especially those FERS employees who have been doing so might want to examine their situation around now.
If FERS investors hit the dollar cap before the last pay period of the year, their own investments will shut off until next year and so will government matching contributions worth up to 4 percent of salary (although the automatic 1 percent of salary government contribution would continue). Once lost, matching contributions can’t be recouped. To prevent that from happening, investors might need to make a new investment allocation.
They might wish to discuss the situation with their payroll offices, to determine how many distribution dates will remain in the year by the time they make a change, in order to set up their TSP payroll withholding to their best benefit.
There is no similar consideration for CSRS investors, who get no government contributions.