Does the TSP’s Annual Contribution Limit Include the Agency Match?

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By on August 22, 2017 in Q&A, Retirement with 0 Comments

Jar of coins with a plant growing out of it depicting savings growth

Q.  One of my co-workers insists that the TSP contribution limit of $18,000 covers both his contribution and the government’s matching contribution, so therefore he is contributing less than the full $18,000 each year.  Is he missing out on a savings opportunity?

A.  Absolutely!  The $18,000 amount that you can contribute is called the elective deferral limit, that is, the amount that you can contribute and defer paying taxes on (as long as you are contributing to your Traditional TSP balance).  Agency contributions are over and above that amount.

Let’s say that you are making $100,000 a year and are contributing 18% of your salary ($693 per pay period).  Uncle Sam will be contributing another $5,000 (5%) to the TSP, giving you a total of $23,000 in the TSP.  If your co-worker is also making $100,000 a year, he is contributing $5,000 less than he is allowed to.

Your co-worker’s misconception is not uncommon among FERS employees.  All federal employees should avail themselves of an opportunity to attend a pre-retirement seminar if their agency offers them.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at [email protected] to discuss schedules and costs.

© 2019 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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