TSP Changing its Methodology for Making Catch-Up Contributions

The TSP has announced an upcoming change to its methodology for handling catch-up contributions.

The Thrift Savings Plan announced this week that it will be changing to the “spillover” method for making catch-up contributions beginning in 2021. This will apply to active TSP participants ages 50 and older.

The change will begin with the first pay period in calendar year 2021. According to the TSP, the new method will simplify the process for making catch-up contributions as follows:

  • Participants turning age 50 and older will no longer need to make a separate catch-up election. Once they reach the elective deferral limit (EDL), their regular contributions will automatically spill over toward the catch-up contribution limit.
  • For eligible members of the Federal Employees Retirement System (FERS) and the Blended Retirement System (BRS), contributions “spilling over” toward the catch-up limit will be matched up to the 5% of basic pay to which participants are currently entitled. In other words, spillover will help prevent people from missing out on what they’re already eligible to receive.
  • Payroll offices will no longer need to send catch-up contributions on separate payroll records. For participants turning 50 or older, contributions toward the EDL and the catch-up limit will use the same record. This will not pose any issues for tax reporting as the two are already combined on participant W-2s.

The TSP said that in addition to making it significantly easier for participants to make catch-up contributions, spillover will simplify some payroll processes, such as streamlining payroll records, reducing the burden of tracking how close catch-up-eligible participants are to the EDL, and eliminating some errors.

A bulletin was released this week for agency payroll offices with details and frequently asked questions about the new process.

The current catch-up contribution amount for 2019 is $6,000 per IRS regulations.

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Ian Smith is one of the co-founders of FedSmith.com. He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.