TSP

Participants are allowed to rollover money into their TSP from qualified accounts.

Let’s look at the types of accounts that are qualified. For your Roth TSP, the only account that is considered qualified for a “roll-in” is a Roth retirement account from a previous employer.  An outside Roth IRA is not considered qualified.

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For your traditional TSP, in addition to being able to roll-in a traditional retirement account from a prior employer, you are allowed to roll in certain IRA money.

The IRA money that can be rolled into your traditional TSP consists of any pre-tax money in a traditional IRA.  Pre-tax traditional IRA money would be everything in a traditional deductible IRA (i.e., an IRA where you were able to deduct your contributions from federal income tax) and the earnings portion of a traditional non-deductible IRA (i.e., an IRA where you were not able to deduct your contributions from federal income tax).

More on TSP Transfers at ask.fedweek.com

You would utilize form TSP-60 to roll money into your TSP account.

Contribution allocation vs. interfund transfer

There are two ways of allocating money in your Thrift Savings Plan account; a contribution allocation and an interfund transfer. Participants often get confused as to which is which.

A contribution allocation only affects money that you are contributing to the TSP; it doesn’t affect money that is already in your account.  You are allowed one change in your contribution allocation per pay period and, when you make that change, you can change both the amount you are contributing and the distribution of your contribution between the TSP funds.

When the elective deferral amount increases (as it did in 2018) you would change your contribution allocation to ensure that you are contributing the full allowable amount to your TSP account.  You make changes in your contribution allocation via your agency’s payroll interface (e.g., Employee Express, EBIS, etc.).

Have a question about the TSP? Post it here: ask.fedweek.com

On the other hand, an interfund transfer only affects money that is already in your TSP account; it doesn’t affect your contributions.  You are allowed two interfund transfers per month, with an exception for “safe harbor” transfers.  An interfund transfer is a way to rebalance your account.  You make interfund transfers on the TSP website.

The Thrift Savings Plan still requires withdrawals to be proportional between your traditional and Roth balances.  If you begin withdrawing from the TSP prior to reaching age 59 ½, this results in part of the Roth withdrawal being subject to federal income tax because Roth withdrawals are not qualified until both of the following are true:

1) You’ve had a Roth balance in your account for at least five years; and

2) You’re at least 59 ½ years old.

You cannot avoid this by rolling the Roth portion of a TSP into a Roth IRA while leaving the traditional portion still in the TSP. The reason is that, in order to do a rollover, you have to make a withdrawal (whole or partial) from your TSP account and elect to transfer that withdrawal to an IRA, or other tax-deferred investment, with another custodian.  Remember, withdrawals must be proportional, so you’re not allowed to roll over only the Roth portion of your TSP account.  (Note: the TSP has announced plans to eliminate the proportionality requirement but has not said when it will do so – subscribe to FEDweek’s Thrift Savings Plan Report to stay up to date on important developments in the TSP.)