TSP

The Thrift Savings Plan has a few advantages over similar workplace retirement savings plans; specifically low expenses and the generous employer match that is received by FERS and BRS participants. Following are a few more advantages of the TSP:

You are immediately vested in all of your contributions to the plan and, if you are FERS, you are immediately vested in the 4% that represents the agency match. You will become vested in the agency automatic 1% contribution after you have been a federal employee for three years.

With the TSP, you can automate your retirement savings. If you had to sit down every two weeks, write a check and mail it to the TSP, you would have a lot less money than you do now set aside for your retirement. Of course this means that if you come into a lump sum of money (let’s say a wealthy uncle leaves you an inheritance), you cannot put it directly into the TSP. But there are other ways to invest such a windfall (IRAs or taxable accounts come to mind).

You’re allowed to change your contribution allocations each pay period. This applies to both the amount you contribute and into which funds those contributions go. You can do this by using your agency’s payroll interface (e. g., Employee Express, EBIS, etc.). This is a far cry from the early days of the TSP when there were only two “open seasons” a year in which you could change your contribution allocation (each of them was 2 ½ months long). If you have both Roth and traditional balances in your TSPs: any contribution allocation decisions you make are applied proportionally to your Traditional and Roth balances.

You have the ability to make two unrestricted interfund transfers per month. You are allowed to make more than two transfers per month if the additional transfers are “Safe Harbor” transfers (money being moved only into the G fund). As with contribution allocations, if you have a Roth balance in your TSP, any interfund transfer decisions you make will be applied proportionally to your Traditional and Roth balances.

You can roll or transfer funds into your TSP from other qualified plans. This can be done not only by current employees, but also by those who have already separated from the service. You can roll a traditional 401(k) type plan and pre-tax monies from traditional IRAs into your traditional TSP balance, and Roth 401 (k) type plans into your Roth TSP balance. You are not allowed to roll an outside Roth IRA into your Roth TSP.

With these advantages, we all should be participating in the Thrift Savings Plan. In fact, recent statistics show that over 90% of FERS employees are saving for retirement through the TSP. This is a significantly higher participation percentage than we see in private sector plans. Apparently, federal employees are well aware of the TSP’s advantages and are taking advantage of them.

Read more about TSP transfers at ask.FEDweek.com