February 13, 2013
Subject: TSP Roth - TSP Traditional
Federal Employees are Eligible to enroll in the Thrift Savings Roth and the Traditional TSP
What is the Roth TSP? The Roth option allows federal employees to contribute after-tax dollars toward their retirement-savings accounts. Under the traditional TSP, federal employees invest tax-deferred dollars into their accounts, meaning the money isn't taxed until it's withdrawn. Employees will be able to invest in both plans, but the combined contribution cannot exceed the 2013 limit of $17,500. Roth participants will still be eligible for the matching contribution from agencies, however, the matching contributions — 1 percent automatically and 4 percent in actual matching — will only be deposited in the traditional TSP account. *This is the case even if the employee contributes only to the Roth TSP* Automatic enrollment in the TSP, which currently directs 3 percent of employee pay automatically to the TSP unless employees opt out, will continue. But, the default contributions will continue to go toward the traditional TSP unless federal employees specify otherwise. Additionally, even after an employee joins the Roth option, money already in his or her account, will stay invested in the traditional TSP balance, and employees will not be able to convert it to the Roth option.
Where do I find more information?
The TSP's website has been updated to reflect the Roth changes, including an explanatory video and a side-by-side comparison of the Roth TSP and the traditional plan. Employees will also be able to download updated forms, tax notices and fact sheets. For your convenience, attached is the side by side comparison of both plans.