Active duty? Act now or your Roth TSP contributions may stop

| January 8, 2015 | 0 Comments

By Abigail C. Reid
Federal Retirement Thrift Investment Board

If you’re an active duty member of the Army, Air Force or Navy making dollar-amount Roth contributions to your Thrift Saving Plan (TSP) account, these deductions will stop Jan. 31, 2015, unless you act now.

How your election requirements have changed. As of Jan. 1, 2015, a change in myPay now requires 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 Roth contributions only; traditional contributions are already designated as a percentage of pay.

When the change takes effect. The new requirement took effect Jan. 1. If your new Roth election is not received by Jan. 31, then DFAS will not be able to process your Roth contributions until you update them in myPay.

How to make the change. Log into 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. You may also download the January 2015 version of Form TSP-U-1 from the Forms & Publications section of tsp.gov and return it to your service.

Why you should make the change. 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 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 both tax-free growth and tax-free withdrawals.

(Editor’s note: The change to TSP includes Navy reservists who serve more than 30 days on active duty.)

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