The TSP has issued guidance on the “spillover” policy effective in 2021 affecting investors—those age 50 and older in a given year, even if they haven’t reached their 50th birthday yet—who are eligible to make additional investments (called catch-up contributions) above the standard investment limits.
Under the TSP’s traditional policies, investors have been required to file an additional investment election (form TSP-1-C) and certify that they planned on meeting standard limit, called the elective deferral limit, in order to make catch-up contributions.
Said the TSP in a notice to agencies, “this requirement was not always clear to participants, or agencies and [military’ services. When participants made catch-up contributions without meeting the elective deferral limit, they could miss out on matching contributions.”
Effective January 1, participants will no longer make separate catch-up elections. Instead, the TSP will determine if the participant is eligible to make additional contributions toward the catch-up limit based on date of birth.
“If the participant is eligible to make catch-up contributions, anything beyond the elective deferral limit will automatically start counting toward the catch-up contribution limit. These additional contributions will “spill over” until the participant meets the catch-up limit for those age 50 or older,” the TSP said.
“Contributions spilling over toward the catch-up limit will be matched, but only on up to the 5% of salary to which participants are already entitled,” it added.
It told agencies to update their payroll systems to account for the change, remove separate catch-up contributions pages from their intranet sites, and “include a brief explanation that participants 50 and older should add any contributions toward the catch-up limit in the same place as their other TSP contributions.”
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