Q&A on the TSP

By Molly C. Herndon

Did you join our January 12 webinar “Thrift Savings Plan Review“? If so, you know speaker Stewart Kaplan discussed several of the changes coming to the TSP as well as answered many questions participants had about the savings plan. Here, Mr. Kaplan provides detailed responses from our webinar participants:

Q.     Can you move current TSP funds from traditional into a TSP ROTH? (Are there any opportunities to roll Roth accounts into a TSP ROTH? Or Can traditional TSP funds be moved into ROTH TSP funds?)

A.      This is an in-plan rollover.  There’s a fairly detailed history of legislation that led eventually to the The American Taxpayer Relief Act of 2012 (“ATRA”), P.L. 112-240.  Basic ally, the change allowed plans to do in-plan Roth rollovers of more than just “otherwise distributable amounts.  Plans were never required to put this option in effect.  Some did and some didn’t.  The TSP conducted an exhaustive study considering all aspects to include experience and data of plans that had adopted it, a comprehensive study of the tax effects, etc., etc.  The results of the study were carefully considered by the FRTIB Executive board and they made the decision not to adopt this option for the TSP at this time.  This does not mean it will never be adopted.  So, it’s still possible at some point in the future, but it is not currently an option.

Q.     What type of income qualify for tax free ROTH TSP contribution? Combat pay?

A.     A service member can make contributions from: Basic Pay and, if they contribute at least 1 percent from basic pay, they can also contribute from special, incentive, and bonus pay if they receive it.  If receiving CZTE pay, that can be contributed to the TSP.  Although CZTE pay falls under the Annual Additions Limit, contributions designated as Roth are limited to $18,000. Basic Allowance for Housing, Basic Allowance for Subsistence and all other “allowances” are not pay and are NOT taxable and therefore not “income,” and not eligible to be contributed to the TSP

Q.      Will retirees be allowed to contribute in the future from retired pay?

A.      No.  No Defined Benefit Plan accepts contributions from anything other than the pay of active employees.

Interested in learning more? Watch the recording of this webinar here.