Tips for Rolling Over 401(k) Retirement Plans and IRAs to the TSP

Federal employees who previously worked in the private sector and had participated in employer-sponsored qualified retirement plans (for example, 401(k) qualified retirement plans) have the option of rolling over those plans into their existing Thrift Savings Plan (TSP) accounts.

A TSP participant can rollover qualified retirement plans such as 401(k), 403(b), 457 plans and/or a traditional IRA to an existing TSP account.

Advantages of Rolling Over to the TSP

There are several advantages to rolling over an old retirement plan or a traditional IRA to the TSP.

One advantage is the consolidation of retirement savings into one retirement account. This consolidation will hopefully make it easier for a TSP participant to evaluate whether the participant is on target to meet his or her retirement goals using the right investment allocations.

Consolidating one’s retirement savings is also important for a secure financial future. According to the Employee Benefit Research Institute, Americans change jobs frequently. The average 401(k) participant has 9.9 employers over the course of his or her working career. That means every year 14.8 million Americans with workplace retirement plans move to new jobs.

When these workers change jobs, their retirement savings unfortunately do not move with them. These workers may forget to rollover or transfer their old retirement plans into their new retirement plans.

Even worse, according to the UBC Sauder School of Business 41 percent of US workers cash out their retirement plans when they leave their employers.. Of the 41 percent, 85 percent drain the entire retirement account, resulting in early withdrawal penalties and large federal and state income tax liabilities.

It is therefore important for those federal employees who previously participated in employer-sponsored qualified retirement plans (including 401(k), 403(b), 457, SEP-IRA, and SIMPLE IRA retirement plans) to find out if they left behind retirement plan account savings. If they have problems contacting their old employers or their old employers are not offering any assistance, the employee can search 401(k) databases such as the National Registry of Unclaimed Retirement Benefits.

How to Rollover Money to a TSP Account

The following table summarizes the types of retirement accounts that can be rolled over or transferred into a TSP participant’s traditional TSP and Roth TSP account.

Note that a Roth IRA is not allowed to be rolled over or transferred into a Roth TSP account.

There are two options available to a TSP participant (both a federal employe and a federal annuitant) for rolling over money into his or her TSP account from an eligible retirement plan or from a traditional IRA (see table above). They are: (1) Using the TSP concierge service; and (2) Using the self-service option through the TSP website MyAccount. Both options are discussed below.

TSP Rollover Concierge Service

A TSP participant calls the TSP ThriftLine (1-877-968-3778). The TSP participant will need his or her six-digit ThriftLine PIN in order to access his or her account. Business bours are Monday – Friday, from 7:00 am to 9:00 pm, Eastern time. For TSP participant living outside the United States, the telephone number is 404-233-4400 (not toll-free).

A rollover specialist will assist the participant with each step of the rollover process. The rollover specialist will contact the providers who administer the account the TSP participant is rolling over to the TSP, completing the distribution process on the TSP participant’s behalf, and contact the TSP participant for any signatures needed to finalize the rollover into the TSP participant’s TSP account. In so doing, the specialist will ensure that the funds to be rolled over to the TSP participant’s account are done correctly.

Self-Service Rollovers into MyAccount

When a TSP participant logs into MyAccount, the participant can use an online tool to start the rollover distribution process. The participant contacts the provider of the eligible retirement plan and/or the traditional IRA custodian and requests a rollover distribution. The TSP participant will then send eligible distribution documentation and any rollover checks to the TSP. The steps and rollover guidelines are available in MyAccount.

Distinguishing Between Direct Rollovers and Indirect Rollovers

A direct rollover occurs when the eligible retirement plan administrator or traditional IRA custodian sends all or part of the TSP participant’s retirement funds directly to the TSP. Retirement funds that are directly rolled over are not taxed as income at the time of the rollover.

In an indirect rollover, the eligible retirement plan or IRA custodian sends the TSP participant the retirement funds. The TSP participant, upon receiving the retirement funds, has 60 days to complete the rollover. In an indirect rollover of traditional (not Roth) retirement funds, the retirement plan will withhold the appropriate amount (usually 20 percent) in federal income taxes. If the TSP participant wants to rollover the entire amount of the retirement distribution and to continue to defer federal (and state) income taxes, then the TSP participant will need to make up in full the amount of federal income taxes withheld.

Investing Rollover Contributions

The retirement funds a TSP participant rolls over from an eligible retirement plan or an IRA will go into the TSP participant’s account, according to the participant’s investment election on file. Rollovers do not count against the Internal Revenue Code limits on annual contributions ($22,500 for employees under age 50 during 2023; $30,000 for employees aged 50 and older as of December 31, 2023).

A TSP participant can choose a different TSP fund allocation for their rollover funds by going to the TSP website before completing the rollover, or by completing a reallocation or fund transfer after the rolled over money is in the TSP participant’s account.