FERS Employees:
Don't Miss Out on Agency Matching TSP Contributions in 2013
November 27, 2012
FERS employees who participate in the Thrift Savings Plan (TSP) and their
contributions reach the IRS elective deferral limit before the last pay date of
the year, will not receive all of the matching contributions to which they would
otherwise be entitled.
To plan their 2013 TSP contributions, FERS employees can use the calculator,
"How much can I contribute?" to ensure they don't leave any money on
the table.
The online calculator is available here.
The TSP also recently released an updated fact sheet regarding the annual
limit of TSP contributions. Highlights are below:
What are elective deferrals?
Elective deferrals are amounts that you ask your employer to deduct from your
pay and contribute on your behalf to an employer-sponsored retirement plan. All
tax-de¬ferred traditional contributions that you elect to contrib¬ute to the TSP
and all Roth after-tax contributions that you elect to contribute to the TSP are
elective deferrals.
The combined total of your tax-deferred traditional and Roth after-tax
contributions (excluding catch¬up contributions) cannot exceed the elective
deferral limit in any year.
Elective deferrals do not include Agency Automatic (1%) or Agency Matching
Contributions because those contributions are not considered part of your pay.
What is the annual limit on elective deferrals?
Section 402 of the Internal Revenue Code (IRC) limits the amount of
income you may elect to defer under all employer-sponsored retirement plans
during a tax year. (For most employees, a tax year is January 1 through December
31.) The elective deferral limit for 2012 is $17,000. The 2013 limit is
$17,500.
What happens to my employee contributions when the annual limit is
reached?
When the annual limit is reached, your employee contributions toward the
elective deferral limit must be suspended for the remainder of the year. The TSP
system will not allow any employee contribution to be processed that will cause
the total amount of employee contributions for the year to exceed the annual
limit. Your payroll office must ensure that your employee contributions
au¬tomatically resume the first pay date in the following year.
What happens to my Agency Matching Contributions when the annual
limit has been reached?
If you are a FERS employee, your Agency Matching Contributions are also
suspended when the annual limit on elective deferrals has been reached. Agency
Matching Contributions are based on the amount of employee contributions that
you make each pay period. If there are no employee contributions in a pay
period, there can be no Agency Matching Contributions.
What happens to my Agency Automatic (1%) Contributions when my
employee contributions and Agency Matching Contributions are
suspended?
If you are a FERS employee, your agency must continue to submit Agency
Automatic (1%) Contributions even though your employee contributions and Agency
Matching Contributions are suspended. As a FERS employee, you are entitled to
receive Agency Automatic (1%) Contri¬butions whether or not you make employee
contributions.
Does it make a difference if I reach the annual limit before the end
of the year?
Yes. If you are a high-salaried FERS employee, you should keep the annual
contribution limit in mind when deciding how much you will contribute to your
TSP account each pay period. If you reach the annual maximum too quickly, you
could lose some Agency Matching Contributions because you only receive Agency
Matching Contributions on the first 5 percent of your basic pay that you
contribute each pay period. If you reach the annual limit before the end of the
year, your contributions (and consequently your Agency Matching Contributions)
will stop. (If you are purposely making larger contributions early in the year
in an attempt to maximize your earnings, be aware that the amount you could lose
in Agency Matching Contributions would, in all likelihood, be far greater than
the value of the added earnings you might receive by making employee
contributions sooner.)
How can I make the maximum employee con-tribution and still receive
the maximum Agency Matching Contribution each year?
To receive the maximum Agency Matching Contribution, you must contribute at
least 5 percent of the basic pay you earn each pay period during the year. (The
first 5 percent of your basic pay each pay period is matched --
dollar-for¬dollar on the first 3 percent and 50 cents on the dollar for the next
2 percent.)
To determine a dollar amount you can contribute each pay period so that your
contributions are spaced out over all the (remaining) pay dates in the year, use
the Elective Deferral Calculator on the TSP web site (http://www.tsp.gov).
If I make up employee contributions that my agency or service should
have made in a previous year, will they count against this year's elective
deferral limit?
No. Employee contributions are subject to the IRC elective deferral limit for
the year in which the contributions should have been made. If, due to an error,
your agency or service failed to make your employee contributions in a previous
year and you make up those contributions this year, your makeup contributions
will not count against this year's elective deferral limit.
What about catch-up contributions? Do they count against the regular
IRC elective deferral limit?
No. Catch-up contributions are payroll deductions that participants who are
age 50 or older may be eligible to make in addition to regular employee
contributions. You need to make a separate election to request them, and they do
not count against the IRC elective deferral limit. However, each year, the IRC
limits the total amount of regular and catch-up contributions an employee can
make. (For example, in 2012, total contributions cannot exceed $22,500: $17,000
in regular contributions, and $5,500 in catch-up contributions; in 2013, they
cannot exceed $23,000: $17,500 in regular contributions, and $5,500 in catch-up
contributions.). See the fact sheet, Catch-Up Contributions, for more
information on http://www.tsp.gov
How does the TSP apply the limits if I contribute to both a civilian
and a uniformed services TSP account?
The elective deferral limit applies to the total contributions you make
during the year to both accounts. During the year, the TSP will apply the limit
to each account separately and will not allow you to contribute an amount to
either account that exceeds the limit. In January, the TSP will check to see
whether your combined contributions to both accounts exceeded that limit and, if
so, it will then return any excess contributions, along with attributable
earnings on those contributions. The TSP will return excess contributions and
earnings first from the contributions you made to your uniformed services TSP
account. If you made both traditional and Roth contributions during the year,
the excess contributions and earnings returned to you will include a
proportional amount from your Roth and traditional balances.
The TSP will apply the same process to catch-up contributions made to
both accounts that exceed the separate catch-up contribution limit.
Note: Tax-exempt contributions made to a uniformed services account while
deployed to a designated combat zone do not count toward the IRC elective
deferral limit. However, Roth catch-up contributions made while earning
tax-exempt pay will count toward the catch-up contribution limit.
To download the complete fact sheet from the TSP, go
to:
https://www.tsp.gov/PDF/formspubs/oc91-13.pdf
| 
Overview - CSRS
