The Thrift Savings Plan |
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What is the Thrift Savings Plan?
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees. Congress established the TSP in the Federal Employees' Retirement System Act of 1986. The purpose of the TSP is to provide retirement income. The TSP offers Federal employees the same type of savings and tax benefits that many private corporations offer their employees under "401(k)" plans. TSP regulations are published in title 5 of the Code of Federal Regulations, Parts 1600–1690, and are periodically supplemented and amended in the Federal Register. (On October 30, 2000, the Floyd D. Spence National Defense Authorization Act was signed; it extends participation in the TSP to members of the uniformed services, including the Ready Reserve. More information concerning the TSP for members of the uniformed services can be found in the TSP Features for the Uniformed Services.)
In the civilian component of the TSP, employees covered by the Federal Employees' Retirement System (FERS) and the Civil Service Retirement System (CSRS) can contribute to the TSP. The participation rules are different for FERS and CSRS employees.
The TSP is a defined contribution plan. The retirement income that you receive from your TSP account will depend on how much you (and your agency, if you are a FERS employee) have contributed to your account during your working years and the earnings on those contributions.
The contributions that you make to your TSP account are voluntary and are separate from your contributions to your FERS Basic Annuity or CSRS annuity.
How does the TSP differ from the FERS Basic Annuity and the CSRS annuity?
In contrast to the TSP, the FERS Basic Annuity and the CSRS annuity are defined benefit programs. This means that the benefits you receive from your FERS or CSRS annuity are based on your years of service and your salary, rather than on the amount of your contributions and earnings. Most of the contributions to these annuity programs are made by your agency on your behalf. Your contributions are mandatory and the amount you contribute is defined by law. Your contributions are made by payroll deductions that your agency takes automatically from your paycheck. The FERS Basic Annuity and the CSRS annuity are administered by the Office of Personnel Management.
On the other hand, your TSP contributions are voluntary, and in an amount you choose. Your TSP benefits are in addition to your FERS or CSRS annuity. If you are a FERS employee, the TSP is an integral part of your retirement package, along with your FERS Basic Annuity and Social Security. If you are a CSRS employee, the TSP is a supplement to your CSRS annuity.
The Federal Retirement Thrift Investment Board administers the TSP and contracts with the U.S. Department of Agriculture's National Finance Center (NFC) to serve as the TSP record keeper. Your employing agency also plays an important role in TSP administration.
The Board. The Federal Retirement Thrift Investment Board is an independent Government agency. The five members of the Board and the Executive Director are required by law to manage the TSP prudently and solely in the interest of the participants and their beneficiaries.
Money in the TSP and earnings on that money cannot be used for any purpose other than providing benefits to participants and their beneficiaries and paying TSP administrative expenses.
The financial statements of the Thrift Savings Fund are required by law to be audited annually (The Plan year is the calendar year). You may obtain the audited financial statements from this Web site.
Your Agency. Your agency is responsible for determining your retirement coverage and reporting to the record keeper the dollar amount of contributions to your account each pay period. Your agency also distributes TSP materials and answers your questions about the TSP. While you are employed, your agency is your primary TSP contact.
You should compare the information on the earnings and leave statements that you receive from your agency with your TSP participant statements to ensure that your agency has provided the record keeper with correct and up-to-date information about your contributions. As long as you are employed by the Federal Government, your agency must also provide the record keeper with the personal information that is necessary to maintain your account — for example, your date of birth and your address. If you need to correct your TSP account information, including your address, contact your personnel office. Your agency is responsible for correcting errors in your personal information and in contribution (and loan payment) amounts.
The Record Keeper. The Board has an agreement with the National Finance Center (NFC) in New Orleans, Louisiana, to provide record keeping services for the TSP. NFC maintains the accounts of TSP participants and provides quarterly participant statements.
The TSP Service Office at NFC processes contribution allocations, interfund transfers, loans, withdrawals and transfers of funds into the TSP from other plans, as well as participants' designations of beneficiaries. The TSP Service Office is also your primary contact after you separate from Federal service.
What are the major features of the TSP?
FERS Participants — You can contribute up to 14 percent of your basic pay each pay period to your TSP account as soon as you become a Federal employee. Once you are eligible, you will receive:
CSRS Participants — You can contribute up to 9 percent of your basic pay each pay period to your TSP account. You do not receive any agency contributions.
All Participants — The TSP offers the following:
– Government Securities Investment (G) Fund
– Fixed Income Index Investment (F) Fund
– Common Stock Index Investment (C) Fund
– Small Capitalization Stock Index Investment (S) Fund
– International Stock Index Investment (I) Fund
How does the TSP fit
into the total retirement plan for FERS employees?
The TSP is one of the three parts of your retirement package, along with your FERS Basic Annuity and Social Security. Participating in the TSP does not affect the amount of your Social Security benefit or your FERS Basic Annuity.
The money that you save and earn through your TSP account will provide an important source of retirement income. The TSP is especially important to FERS employees because the formula used to compute your FERS Basic Annuity is less generous than the formula used to compute the CSRS annuity.
As a FERS employee, you may begin contributing to the TSP when you are first hired by the Federal Government. Once you become eligible for agency contributions (i.e., the second open season after you are hired), you will receive Agency Automatic (1%) Contributions whether or not you are contributing to your account. If you are contributing to your account, you will also receive Agency Matching Contributions at that time. These matching contributions are a principal benefit of the TSP.
Federal income taxes are deferred on all contributions to your account. To learn more about this important feature, see "Tax Advantages of the TSP."
Your TSP benefits can significantly increase your retirement income, but starting early is important. If you start to contribute to your TSP account as soon as you are hired, the earnings in your account will compound over a longer period of time. Also, if you make certain to contribute your own money early on, you will not miss out on Agency Matching Contributions once you become eligible for them. To learn how your account could grow, use the calculator " Projecting Your Account Balance."
To find out more about your FERS Basic Annuity and how the TSP fits into your total retirement plan, contact your personnel office. For more information about your Social Security benefits, contact your personnel office or the Social Security Administration.
How does the TSP fit
into the total retirement plan for CSRS employees?
If you are a CSRS employee, the TSP can provide you with a source of retirement income in addition to your CSRS annuity. Although you do not receive any agency contributions, you do have the benefit of deferring taxes on your contributions and on the earnings in your TSP account.
To learn more about how you benefit from tax deferral, see " Tax Advantages of the TSP." To see how your account could grow, see " Projecting Your Account Balance." To find out more about your CSRS annuity, contact your personnel office.
What if I can't afford
to contribute very much?
You can contribute as little as one dollar per pay period. Even small savings add up over time. If you are a FERS employee and put in only $10 each biweekly pay period, here's the amount you could have in your TSP account in 25 years. This is in addition to your Agency Automatic (1%) Contributions, which you get whether you contribute or not:
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| Your $10 biweekly contributions | $6,500 |
| Your agency's matching contributions | 6,500 |
| Earnings (assuming 7% a year) | 22,360 |
| Your total | $35,360 |
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| This example assumes that $10 is no more than 3 percent of your basic pay each pay period, so it is matched dollar-for-dollar. (See " What are the basic rules for contributing to the TSP?".) | |
If you are a FERS employee, you should be aware that if you contribute less than 5 percent of your basic pay, you will not receive all of the agency matching money for which you are eligible, and this money cannot be recaptured.
Can I withdraw my money
while I am a Federal employee?
The purpose of the TSP is to provide you with a source of income for your retirement. It is not a savings account that can be withdrawn at any time. If you think you may need your money in the near future, or if you do not have other funds saved for emergencies, you will want to consider your other needs carefully before deciding how much to contribute to the TSP.
However, while you are still employed by the Federal Government, the TSP loan program can give you access to money that you have contributed to your account. In addition, participants who are age 59½ or older can make a one-time withdrawal from their TSP accounts while they are in Federal service. In-service withdrawals for reasons of financial hardship are also available. In-service withdrawals are restricted by law, and the funds withdrawn are taxable. In addition, if you make a financial hardship withdrawal and you are younger than 59½, you will likely be subject to an early withdrawal penalty tax. Other conditions and restrictions apply. (See In-Service Withdrawals.)