What Is the Maximum Percent You Can Contribute to a Thrift Savings Plan?
The Thrift Savings Plan is the federal government's retirement savings plan for its part-time and full-time employees. Employee plans are funded by both their own contributions and the government's contributions. Limits exist on how much you can contribute each year. TSP contributions are governed under the same IRS regulations as other tax-deferred retirement savings plans.
TSP maximum annual contributions are not based on a percentage of an employee's salary. Instead, each TSP-eligible employee faces the same Internal Revenue Service limits on contributions, whether they are paid handsomely or modestly. The IRS adjusts contribution limits for tax-deferred retirement plans each year. As of 2013, TSP participants are limited to making $17,500 in regular contributions a year. If you reach the IRS limit before the end of the year through your TSP, contributions will halt until the new year begins.
Older workers may contribute more to their TSP than younger workers can. These contributions are known as catch-up contributions, and they are designed for workers age 50 and older, who are approaching retirement and may want to strengthen their retirement savings during their remaining working years. The limit on catch-up contributions to TSP accounts is $5,500, bringing the maximum yearly contribution to $23,000 for workers 50 and older.
Federal agencies provide matching contributions to TSP accounts that can reach a maximum of 5 percent of a worker's base pay. Your employer matches your contribution dollar for dollar on the first 3 percent and 50 cents per dollar for the next 2 percent. The maximum combined employer and worker contributions to a TSP or other defined contribution plan in a single year is $51,000, as of 2013.
Contribution limits do not apply solely to a TSP but to all of an individual's tax-deferred retirement plans. Therefore, a TSP participant needs to track contributions made in all plans to avoid excess contributions in a single year. Contributions that exceed the IRS limits count as taxable income. You can leave the excess contributions in your accounts, but they will not carry the tax advantages associated with the plans. Any matching contributions received because of excess contributions will be removed.
- Thrift Savings Plan: Contribution Limits
- Thrift Savings Plan: How Much Can I Contribute?
- Thrift Savings Plan: Participant Eligibility
- Thrift Savings Plan: Contribution Allocations
- Thrift Savings Plan: Types of Contributions
- Society for Human Resource Management: For 2013, IRS Raises 401(k) and Pension Plan Limits
Tom Gresham is a freelance writer and public relations specialist who has been writing professionally since 1999. His articles have appeared in "The Washington Post," "Virginia Magazine," "Vermont Magazine," "Adirondack Life" and the "Southern Arts Journal," among other publications. He graduated from the University of Virginia.