Thrift Savings Plan officials recently release the 2012 Thrift Savings Plan Contribution Limits, as stated by the IRS. Thrift Savings Plan contribution limits are calculated on an annual basis and can change based on rules set by the IRS. The TSP contribution limits for 2012 increased to $17,000 from $16,500. There was no change for catch-up contributions, which continue to be $5,500 for persons aged 50 and up.
The following chart displays the 2011 Thrift Savings Plan contribution limits, with notes about each type of contribution.
2012 Thrift Savings Plan Contribution Limits
| 2012 Thrift Savings Plan Limits |
Max Contribution | Notes |
|---|---|---|
| Elective Deferral Limit* | $17,000 | Elective deferral contributions only apply to regular employee contributions that are made in before-tax (i.e., tax-deferred) dollars. For members of the uniformed services, this includes all tax-deferred contributions from taxable basic pay, incentive pay, special pay, and bonus pay. |
| Max Annual Addition Limit | $50,000 | An additional limit imposed on the total amount of all contributions made on behalf of an employee in a calendar year. Uniformed service members become subject to this limit when tax-exempt contributions are made to their TSP accounts. This limit includes employee contributions (both tax-deferred and tax-exempt), Agency Automatic (1%), and Agency Matching Contributions. |
| Catch-up Contribution Limit | $5,500 | The maximum amount of catch-up contributions that can be contributed in a given year by participants age 50 and older. It is separate from the elective deferral and annual addition limit imposed on regular employee contributions. |
Historic Thrift Savings Plan Contribution Limits
| Year |
Annual Contribution Limit |
Max Catch-Up Contribution Limit |
|---|---|---|
| 2007 | $15,500 | $5000 |
| 2008 | $15,500 | $5000 |
| 2009 | $16,500 | $5500 |
| 2010 | $16,500 | $5500 |
| 2011 | $16,500 | $5500 |
| 2012 | $17,000 | $5500 |
Types of Thrift Savings Plan Contributions
There are two types of TSP contributions:
- Regular employee contributions (including automatic enrollment contributions)
- Catch-up contributions (for participants age 50 or older)
Regular contributions. Eligible TSP participants can begin making regular employee contributions at any time. These contributions are made from basic pay before taxes are withheld. Your contribution will remain in place until you elect to stop or change the contribution amount, reach the contribution limit, or take a Thrift Savings Plan financial hardship withdrawal.
Catch-up contributions. Catch-up contributions are only available to those age 50 and above. To make catch-up contributions, you must first contribute the maximum amount of regular employee contributions, for the year, the elect to make catch-up contributions. Your catch-up contributions will stop automatically when you reach the contribution limit or at the end of the calendar year. You will need to elect to make catch-up contributions each calendar year.
Uniformed Services TSP Contributions
The Thrift Savings Plan is available to all military members. Military members are eligible to contribute any whole percentage of basic pay, as long as the annual total of the tax-deferred investment doesn’t exceed the maximum contribution limit. Military members also have the option of contributing any portion of their incentive pay, bonuses, or special pay so long as they contribute a portion of their basic pay.
Tax free combat zone contributions. Military members serving in tax-free combat zones are allowed to contribute up to $49,000. This total includes regular deferred contributions, tax-exempt combat zone contributions and special pay and bonuses.
Note regarding catch-up contributions and tax free pay: Military members who are eligible to make catch-up contributions must have basic pay that is not subject to the combat zone tax exclusion to make catch-up contributions. If 100% of your pay is tax-exempt, you will not be able to make catch-up contributions.
TSP Federal Agency Contribution Chart
FERS Employees receive an automatic 1% contribution from the federal government, then a 100% match for the first 3% they contribute, followed by an additional 0.5% match for the next 2% the contribute, bringing the maximum agency contribution to 5%. Federal employees can contribute as high of a percentage of their salary as they wish, so long as they don’t exceed total contribution limits, including the catch-up limits allowed for those age 50 and above.
The following chart can be used by Federal Employees to determine the total amount of their contributions including agency match.
TSP Agency Contribution Chart
Other notes about TSP contributions
The following information should help you determine how to allocate your TSP contributions:
- Contributing by percentage of pay. If you elect to contribute a percentage of pay to the TSP and the amount is more than your remaining salary after mandatory deductions (e.g. Federal income tax, state taxes, TSP loan payments, etc.) and other voluntary deductions that are processed before TSP contributions, then the resulting pay will be the amount withheld and contributed to your TSP account.
- Contributing by dollar amount. If you designate a whole dollar amount that is greater than your remaining salary, then no employee contributions will be made for that pay period, and if you are FERS you will not receive Agency Matching Contributions for that pay period. If this occurs, you will need to lower your contribution level by electing to contribute either a lower percentage or dollar amount. No TSP contributions will be withheld from your pay until your new election is effective. Neither the new election or any matching contributions will be applied retroactively.
- Automatic contributions. The Thrift Savings Plan recently began Automatic TSP Contributions for New Employees.
- Roth TSP. The Roth TSP account is on it’s way and should be here within a year. Here is more information about the Roth Thrift Savings Plan (TSP).
The Thrift Savings Plan is a great opportunity to save money for retirement and you should take advantage of it if you are eligible to participate. You can read more about the contribution rules at the TSP page.
Comments
Unfortunately no change from 2010. But in this low inflation/COLA environment that is not surprising.
Ryan – why does DFAS refuse to let deployed members earning more than the tax free base pay cap make deferred contributions – DFAS insists the first dollars of TSP contributions come from tax free pay! Only if you elect like 100% TSP deduction can I get to my taxable pay!
This seems anti-service member as some of us are trying to lower our AGI so we can enjoy certain deductions and credits.
Mike, I’m not 100% certain, but I believe there are rules regarding how contributions are made, and in which order they come from your pay. I recommend contacting someone at DFAS or the TSP.
Ryan,
Do you know if the TSP allows military members to make contributions for the previous tax year before the tax deadline as other retirement account types do? For instance, I do not currently have a TSP but am interested in opening one and contributing a lump sum for 2011 contributions in order to reduce my 2011 taxable income while also investing.
Thanks!
That’s a great question, David, but the answer, so far as I am aware, is no. Contributions must be made during the calendar year. You may still be able to open a Traditional IRA to reduce your tax obligation. You have until the tax deadline to fund an IRA for last calendar year. Here are some good options for opening an IRA.
I want to change my TSP to roll over into a ROTH or IRA while I am in a tax free zone. I was told I could do this online. However, how do they know I am actually in a tax free zone?
Adrienne, the Roth TSP hasn’t officially been released yet, so you can’t change it over while you are deployed. However, since you will be in a tax free zone, your contributions will be from tax exempt pay, which will automatically be tracked by the Thrift Savings Plan and your tax free TSP contributions will show up at the bottom of your statements. These tax free contributions are similar to the Roth, as they can be withdrawn without paying taxes when you are in retirement. However, it is only the contributions which can be withdrawn tax free, and not the earnings from those contributions.
After you separate from the military, you will be able to decide what to do with your TSP, including leaving it in the TSP, rolling it into a civilian TSP or a 401k plan, or rolling it into an IRA. If you choose to roll your TSP into an IRA, then you can leave your regular contributions in a Traditional IRA, and roll your tax-exempt contributions into a Roth IRA.