I rolled my TSP into an IRA several years ago because the TSP’s withdrawal choices were so pathetic. With more flexibility in the TSP these days, I feel I would be better off there. Image: eamesBot/Shutterstock.com
By: FEDweek StaffFor employees only – that describes Thrift Savings Plan contributions. You are not allowed to contribute to the TSP once you have separated from federal service. Your contributions must be made by payroll deductions, and once you’re no longer on the payroll (i.e., separated), there’s nothing left to deduct from.
This does not mean that a separated employee cannot still maintain their TSP account – they certainly can; they’re just not allowed to make any additional contributions to their account. Once you have separated, you can withdraw from your account, or you can leave it alone in preparation for future withdrawals.
Though separated employees cannot make contributions to the Thrift Savings Plan, they are still allowed to roll money into their existing TSP account. Rollovers from qualified accounts are not treated as contributions to the TSP. You’re allowed to roll qualified money into your TSP account even if you have begun taking distributions. However, not all IRAs and employer plans are considered qualified for the purpose of rolling them into the Thrift Savings Plan.
If you have a Roth balance in your TSP, you are allowed to roll a Roth plan from a prior, or subsequent, employer into the TSP. But, you are not allowed to roll a Roth IRA into your Roth TSP balance. Don’t ask me why; it’s in the law, even if it doesn’t make sense.
If you have a traditional balance in your TSP (and we all do), you are allowed to roll pre-tax money from IRAs and employer plans into the TSP. That would include everything in a traditional deductible IRA (where you were able to deduct your IRA contributions from your income for federal income tax purposes) as well as the earnings portion of a traditional non-deductible IRA (where your IRA contributions were not deductible). You would also be able to roll over any pre-tax money in an employer sponsored plan from a prior or subsequent employer.
If you’ve left the TSP, can you get back in after you’ve separated? No. Not unless you become re-employed and establish a new Thrift Savings Plan Account. If you return to federal employment as a “re-employed annuitant”, you may or may not be allowed to contribute to the TSP.
I wish I could get back into the Thrift Savings Plan. I rolled my account into an IRA several years ago because the TSP’s withdrawal choices were so pathetic. Now that the TSP Modernization Act has allowed all the withdrawal flexibility that most of us need, I feel I would be better off there. But I’m retired and have absolutely no desire to return to federal service, so there’s no way I could get back in. I suspect that I’m not the only one who is in that situation.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
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