On June 26, 2023, the Office of Personnel Management (OPM) issued a memorandum for Human Resources Directors explaining that at most federal agencies there will be 27 pay periods during leave year 2023. The 2023 leave year at most agencies started January 1, 2023 and will end on January 13, 2024. The memorandum explained that employees will accrue annual leave hours for each full biweekly pay period the employee is employed within the leave year.
The memorandum further explained that because of the additional pay period during leave year 2023, employees will earn an additional pay period’s worth of annual and sick leave hours during the course of the 2023 leave year.
Although employees will earn an additional pay period’s worth of leave, the maximum carryover ceiling on annual leave from one leave year to the next leave year still remains in effect. For most employees, the maximum annual leave carryover is 240 hours or 360 hours (for employees who currently work or at some point of their federal service worked overseas).
However, OPM’s memorandum did not explain anything with respect to the deadline for making Thrift Savings Plan (TSP) contributions during leave year 2023. This column discusses how the additional pay period affects TSP contribution limits for 2023.
Elective Deferral and Catch-Up TSP Contribution Limits During 2023
It is important to first discuss maximum TSP contribution limits for all employees during the calendar year 2023. In general, a retirement plan’s “elective deferral” is the dollar amount that an employee asks his or her employer to deduct from his or her salary, to be contributed to an employer-sponsored “defined contribution” retirement plan, such as the TSP.
All before-taxed contributions that a federal employee contributes to the traditional TSP and all after-taxed contributions that a federal employee contributes to the Roth TSP constitute “elective deferrals.” Their combined total in any calendar year is limited by the IRS’ annual “elective deferral” limit. Employees at least age 50 as of December 31 are limited in their payroll deduction TSP contributions each calendar year to the combined total of their annual “elective deferral” and “catch-up” contribution limits.
It should be noted that a FERS-covered employee’s agency automatic 1 percent of gross (SF 50) salary and 4 percent maximum matching TSP contributions are not included in the “elective deferral” and “catch-up” contribution limits. However, as will be discussed below, a FERS-covered employee is required to contribute a minimum amount each pay date throughout the calendar year in order to receive the maximum 4 percent TSP matching contributions for the calendar year.
The following are the “elective deferral” and “catch-up” contribution limits for calendar year 2023:
• Employees younger than age 50 during 2023 – employees born after December 31, 1973 – can make a combined total of traditional TSP and Roth TSP contributions of no more than $22,500.
• Employees older than age 49 during 2023 – employees born before January 1, 1974 – can make a combined total of traditional TSP and Roth TSP contributions of no more than $30,000. This includes the $22,500 “elective deferral” limit plus the $7,500 “catch-up” contribution limit.
How a FERS-Covered Employee Can Lose Some TSP Matching Contributions from Their Agencies During 2023
When a FERS-covered employe younger than age 50 throughout 2023 reaches the $22,500 “elective deferral” limit, or a FERS-covered employee older than age 49 during 2023 reaches the $30,000 combined “elective deferral” and “catch-up limit” at some point during calendar year 2023, the employee is prohibited from contributing to his or her TSP account during the remainder of calendar year 2023. The employee can resume contributing to the TSP starting with the employee’s first pay date in January 2024.
Most importantly, a FERS-covered employee who reaches the $22,500/$30,000 limit before his or her final pay date during 2023 will have their agency matching contributions suspended for the remainder of 2023.
This is because the employee agency’s TSP matching contributions are based on the amount of employee TSP contributions – combined traditional and Roth TSP contributions – that are made each pay date during 2023. In particular, for a FERS-covered employee to receive the maximum agency matching contribution of 4 percent during 2023, the employee must contribute at least 5 percent of their salary to the TSP (either to the traditional TSP or to the Roth TSP, or to a combination of both) each pay date.
If there are no employee TSP contributions allowed because the employee reached the $22,500/$30,000 limit at a certain pay date, then there will no longer be any employee agency TSP matching contributions for the remainder of calendar year 2023.
How FERS-Covered Employees Can Maximize Their TSP Contributions During 2023 and Receive the Maximum Agency Matching Contributions
As explained above, a FERS-covered employee must contribute at least 5 percent each pay date during calendar year 2023 in order to receive the maximum 4 percent TSP matching contribution from their agencies. Note the following:
• A CSRS or CSRS Offset employee (who does not receive any agency matching contributions) can accelerate his or her TSP contribution during 2023 reaching the maximum $22,500/$30,000 without “losing” anything because CSRS/CSRS Offset employees receive no agency matching contributions.
• If a FERS-covered employee reaches the $22,500/$30,000 limit sometime before his or her last paydate during 2023, the employee will not receive any matching contributions from the employee’s agency through Dec. 31, 2023, but will receive the agency automatic 1 percent of their SF 50 salary contribution from his or her agency.
• The following worksheets can be used by FERS-covered employees to determine the optimum amount of their TSP contributions made via payroll deduction from now through their last pay date for 2023 so as to maximize the agency TSP matching contributions of 4 percent for 2023:
To use these worksheets, the FERS-covered employee should have available his or her most recent leave and earnings statement for 2023.
Worksheet 1. FERS-covered Employees Younger Than Age 50 Throughout 2023
Worksheet 2. FERS-covered Employees Older Than Age 49 Throughout 2023
