Thrift Savings Plan
The Thrift Savings Plan (TSP) was established by Congress in the Federal Employees' Retirement System Act of 1986 and offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans. TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your Agency, if you are eligible to receive Agency contributions) put into your account during your working years and the earnings accumulated over that time.
There are two types of employee contributions: Regular employee contributions (including automatic enrollment contributions) and Catch-up contributions (for participants age 50 or older).
Regular Employee Contributions
You can begin making regular employee contributions at any time. These are payroll deductions that are made from your basic pay. Each pay period, your Agency or service will deduct your contribution to TSP from your pay in the amount or percentage that you indicated when you submitted your contribution election information. Your agency or service will continue to deduct your contribution until you: Make a new election changing the amount, Elect to stop your contributions, Reach the Internal Revenue Service (IRS) contribution limit, or Take a financial hardship withdrawal. For more information, visit https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/contributionLimits.html.
Did You Know?
You are immediately vested in your own contributions and in any earnings they accrue. If you receive matching contributions, you are also immediately vested in those contributions and any earnings they accrue. If you are a FERS employee, your Agency matches your contributions — up to 4 percent if you contribute 5 percent each pay period. Furthermore, when you add the Agency Automatic (1 percent) Contributions to your matching contributions, you will double your 5 percent investment instantly.
Agency Automatic (1 Percent) Contributions
If you are a FERS employee, your Agency will contribute an amount equal to one percent of your basic pay each pay date to your TSP account. These are called Agency Automatic (1 percent) Contributions. There is no waiting period and you do not need to be making employee contributions to receive them. Your Agency Automatic (1 percent) Contributions will be automatically invested in the Government Securities Investment (G) Fund until you make a different choice. Agency Automatic (1 percent) Contributions are not taken out of your pay and they do not decrease the dollar amount of your pay for income tax purposes.
How to get the max?
In order to get the maximum Agency Matching Contributions, you must not only contribute 5 percent of your basic pay each period, but you must also contribute all year long. If you reach the IRS annual limit before the end of the year, your contributions (and consequently, your Agency Matching Contributions) will stop. For enrollment, complete TSP-1, Election Form, or enroll on the Employee Personal Page.
You can begin making catch-up contributions at any time beginning in the year you turn 50. Catch-up contributions are also deducted from your pay. To be eligible to make catch-up contributions, you must expect to contribute the maximum amount allowed of regular employee contributions for the year to the TSP or to an equivalent tax-deferred employer plan, such as a private sector 401(k) or nonprofit 403(b) employer plan. Your catch-up contributions will stop automatically when you reach the catch-up contribution limit or at the end of the calendar year, whichever comes first. You must make a new catch-up contribution election each calendar year. Be aware that if you are a FERS participant, you will not receive matching contributions on any catch-up contributions that you contribute to TSP. For enrollment, complete TSP-1-C, Catch-Up Election Form, or enroll on the Employee Personal Page.
The G Fund assets are managed internally by the Federal Retirement Thrift Investment Board. The G Fund buys a nonmarketable U.S. Treasury security that is guaranteed by the U.S. Government. This means that the G Fund will not lose money.
F,C,S, and I Funds
The Federal Retirement Thrift Investment Board currently contracts BlackRock Institutional Trust Company, N.A. (BlackRock) to manage the F, C, S, and I Fund assets. The F and C Fund assets are held in separate accounts and the S and I Fund assets are invested in Collective Funds. These trust funds are comprised of investments by tax-exempt institutions like TSP, such as pension plans and endowments. Investing collectively in this way can be advantageous because it reduces trading costs. The securities held in these commingled funds are held in trust and they are not assets of BlackRock, nor can they be used to meet the financial obligations of BlackRock.
The F, C, S, and I Funds are index funds, each of which is invested in order to replicate the risk and return characteristics of its appropriate benchmark index. For example, the C Fund is invested in a stock index fund that fully replicates the Standard and Poor's 500 (S&P 500) Index, a broad market index made up of the stocks of 500 large to medium-sized U.S. companies. The C Fund's objective is to match the performance of the S&P 500. The F, C, S, and I Funds remain invested regardless of the performance of the securities markets or the overall economy.
Although the BlackRock Collective Funds operate in a manner similar to mutual funds, they are not. In fact, mutual funds are not open to individual investors. Furthermore, they are trust funds that are regulated by the Comptroller of the Currency, not by the Securities and Exchange Commission, and therefore do not have ticker symbols.
The L Funds are invested in the five individual TSP funds based on professionally determined asset allocations.
For detailed information visit http://www.tsp.gov.