Current Thrift Savings Plan participants who are contributing to the Roth TSP must make changes to how they make their contributions, otherwise their contributions will automatically stop. Current rules allow members to contribute a specific dollar amount to their Thrift Savings Plan account. The new rules will require members to contribute a percentage of their pay instead of a dollar amount. Changes must be made by January 31, 2015. This rule change only applies to Roth TSP contributions, as Traditional contributions are already processed based on a percentage of pay.
Who is affected? All active duty members of the Air Force, Army, and Navy who contribute to the Roth TSP. This will also affect members of the Guard or Reserve who are activated for over 30 days.
Action Required: Log in to your MyPay account after January 1, 2015 and change your contribution to a percentage of your pay instead of a specific dollar amount. When you are in your MyPay account, click the section labeled “Traditional TSP and Roth TSP”. Make your contribution election (for example, 10 percent). Then click the Save button.
Deadline: Changes must be made by January 31, 2015, or your Roth TSP contributions will automatically stop. Be sure to make the change before January 31, as you can’t go back and make retroactive contributions.
Concerns: There isn’t really anything to be concerned about with this change, other than taking the time to get it done! Defense Finance and Accounting Service (DFAS) will take care of everything in the background, and will also give you the ability to track your contributions in MyPay, so you will know how much you have contributed throughout the year.
How to Max Out Your Roth TSP Contributions
If your goal is to max out your annual Roth TSP contributions, then it’s not too much trouble to calculate the percentage you need to contribute. The annual Roth TSP contribution limit in 2015 is $18,000, which comes out to $1,500 per month. Just divide this by your salary to determine how much you need to contribute. If your salary is $6,000 per month, you would divide $1,500 by $6,000 and you would get 25%.
Catch-up contributions, for those age 50 and over, are limited to $6,000 per year. So if you are eligible to make catch-up contributions, be sure to include that in your calculations. The max for you would be $24,000 per year, or $2,000 per month. If you have an $8,000 salary, you would divide your $2,000 contribution by your $8,000 salary, which would also come out to a 25% contribution.
Obviously, not all numbers work out that easily. But the concept is the same.
One caveat: try not to contribute too much to your Roth TSP. The Thrift Savings Plan should refund the extra contributions, but you might find that it is a manual process, or there may be a delay in the refund. So try to get as close to the contribution limit as possible without going over.