TSP Catch-up for Workers Age 50 or Older Becomes Law

December 4, 2002

President Bush signed a bill last Wednesday that will allow federal workers aged 50 or older to contribute more money to their Thrift Savings Plan (TSP) accounts. Before employees will be able to make the higher contributions, the TSP board will have to issue regulations and modify its computer system. Most likely this will happen by the next TSP Open Season beginning on May 15, 2003. For 2003, normal TSP rules limit employees under the Federal Employees Retirement System to annual contributions of $12,000, or 13 percent of salary per paycheck, whichever is lower. Employees under the Civil Service Retirement System and military personnel are limited to annual contributions of $12,000, or 8 percent of salary per paycheck, whichever is lower. Under this new law, the limit on TSP contributions for federal employees age 50 or older would be $2,000 higher than for younger workers in 2003, $3,000 higher in 2004, $4,000 higher in 2005, $5,000 higher in 2006. After 2006, the limit for people age 50 or older would remain at $5,000 above the limit for younger people. Coupled with planned increases in normal TSP contributions, federal employees age 50 or older would be able to contribute as much as $20,000 a year to their TSP accounts beginning in 2006. Congress gave private sector workers the ability to make "catch-up" contributions to their 401k plans as part of the tax relief bill last summer. Eligible employees will be notified as soon as the Thrift Board is able to accept the higher contributions.