Roth TSP contributions may stop unless you act now

| November 28, 2014 | 0 Comments

$20 bills on a clothesline

Abigail C. Reid
Army News Service

If you are an active duty member of the Army, Air Force or Navy making dollar-amount Roth contributions to your Thrift Savings Plan account, these deductions will stop on Jan. 31, 2015, unless you act.

 

How your election requirements will change

An upcoming change in myPay will require you to designate your Roth contributions as a percentage of your pay, not a dollar amount. If you don’t comply with this change, then the Defense Finance and Accounting Service (DFAS) will not be able to process your Roth contributions.

This change affects your Roth contributions only. Your traditional contributions are already designated as a percentage of pay.

 

When the change will take place

The new requirement will take effect Jan. 1, 2015. You will have 30 days to change your Roth election from a dollar amount to a percentage of your pay. If your new Roth election is not received by Jan. 31, 2015, then DFAS will not be able to process your Roth contributions until you update them.

 

How to make the change

Starting January 1, 2015, you can make the change in myPay. You’ll see a special TSP section called “Traditional TSP and Roth TSP”— click there. Then, in the “Contribution from Roth TSP” section, you can enter the percentage of your pay that you’d like to contribute (10 percent, for example). Finally, click “Save” at the bottom of the screen.

 

Why Roth contributions might be good for you

When you make Roth contributions, you pay taxes on the money you save before it goes into your TSP account. So, you pay no income taxes when you take it out, and your earnings can also be tax-free if you have reached age 59½ or have a permanent disability and five years have passed since the year of your first Roth contribution.

As a member of the uniformed services, you can make Roth contributions from tax-exempt pay, basic pay, incentive pay, special pay and bonus pay. If you make Roth contributions from tax-exempt pay earned in a combat zone, you won’t pay taxes on your contributions, and you’ll have the opportunity for tax-free growth.

More Online

The Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services.

It was established by Congress in the Federal Employees’ Retirement System (FERS) Act of 1986 and offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans.

If you are covered by the FERS, the TSP is one part of a three-part retirement package that also includes your FERS basic annuity and Social Security.

If you are covered by the Civil Service Retirement System (CSRS) or are a member of the uniformed services, the TSP is a supplement to your CSRS annuity or military retired pay.

Call the TSP at 1-TSP-YOU-FRST, or 1-877-968-3778, Mondays-Fridays, 2 a.m.-4 p.m., HST. Review videos and visit www.tsp.gov.

 

(Note: Reid works with the Federal Retirement Thrift Investment Board.)

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Category: News, Uncategorized

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