Make-Up Contributions to the TSP

by John Cooney on Jul 25, 2019

Federal Service employees, who also serve in the military, have access to some benefits with regards to the Thrift Savings Plan (TSP) that can apply if the employee is required to leave their Federal job to perform military service.  This article will highlight the eligibility requirements, rules, and provide some examples to help you determine if this is a benefit that you can take advantage of.

Who Qualifies?

To be eligible for benefits for service members who return to Federal Civilian Service, you must meet the following criteria:

  • You separated from civilian service to perform military service, or you were placed in nonpay status to perform military service
  • Your release from military service, discharge from hospitalization, or another similar event occurred on or after August 2, 1990
  • You were subsequently reemployed in, or restored to, a position covered by FERS or CSRS pursuant to the Uniformed Services Employment and Reemployment Rights Act (USERRA)

What are the Benefits?

  • Eligible to receive retroactive 1% automatic contributions and earnings for the period of nonpay status or separation associated with performing military service
  • Eligible to receive retroactive matching contributions to their civilian TSP account IF they contributed to their uniformed services TSP account
  • Employees may make up employee contributions to their civilian TSP that they missed as a result of performing military service
  • Restoration of nonvested accounts
  • Employees who were automatically cashed out may return the funds
  • Extension of payment terms on a TSP loan

Matching Contributions

If you contribute to your uniformed services TSP account while you are in a civilian non-pay status, then you are entitled to receive restored Agency Matching contributions (and earnings on those contributions).  This entitlement applies even if you do not make civilian make-up contributions when you return.  Big caveat here, the matching only applies to contributions made from your military basic pay, it does not include contributions made from incentive, special, or bonus pay.

The amount of the matching contribution is determined by matching dollar for dollar on the first 3% of basic pay contributed and then 50 cents per dollar on the next 2 % of basic pay contributed.  Let’s look at an example.

For the period you were in a civilian non-pay status, you contributed $2,000 from your uniformed service basic pay to your uniformed services TSP account.  Your full-time yearly civilian salary is $50,000.  Therefore, the amount you contributed to your uniformed services TSP account is equal to 4% of your civilian pay ($2,000 divided by $50,000).  The agency matching rules state that you get a 100% match on the first 3% ($1,500) and 50% match on the next 2% ($250), for a total Agency contribution match of $1,750.

Making up TSP Contributions

If you miss time as a result of military service, you are eligible to make up contributions to your civilian TSP account for the time you missed.  To do so, you must submit a written request to your agency within 60 days of the date of your reemployment in civilian service.  There is a limit to the amount you can contribute, and it is important to remember that the limit applies to all contributions, those made to your civilian account, military account, regular contributions and make up contributions.  In 2018, that limit was $18,500 and in 2019, that limit is $19,000.  The best way to explain this is through some examples.

Example 1

FERS employee gets put on military orders for all of 2018.  In 2018, the employee contributes the following amounts to the TSP:

Civilian TSP - $0

Military TSP - $10,000

Employee returns to Federal civilian service in 2019 and elects to make up contributions to the civilian account; how much can he contribute?

2018 Limit = $18,500

2018 total contributions (civilian plus military) = $10,000

Total amount of makeup contributions can not exceed $8,500 ($18,500 minus $10,000)

In this example, assuming the employee/service member is not a Blended Retirement Participant (BRS), he could contribute $8,500 in makeup contributions and would also be eligible to receive the agency 1% automatic contributions and agency matching contributions.  The matching and automatic contributions do NOT count against the $18,500 limit.

Example 2

FERS employee gets put on military orders in May of 2018 to February of 2019.  The contributions made to their TSPs in 2018 and 2019 are below:

2018 civilian TSP - $6,000

2018 military TSP - $6,000

2019 civilian TSP - $17,500

2019 military TSP - $1,000

2018 Limit - $18,500

2018 Total contributions ($12,000)

Total amount of make-up contributions for 2018 cannot exceed $6,500 ($18,500 minus $12,000)

2019 total contributions ($18,500)

Total amount of make-up contributions for 2019 cannot exceed $500 ($19,000 minus $18,500)

Let’s review a couple of big points; first, make-up contributions apply to the year they are “making-up” not to the year they are actually made.  Makeup contributions made in 2019, for periods missed in 2018, apply to the 2018 limit, not the 2019 limit.  Second, the limit to contribute is an aggregate limit not a per account limit. 

Blended Retirement System

The biggest area that is affected for those service members who are BRS participants is in regards to the matching contributions.  A key point to remember is that for determining the matching contributions, the military match is based on your military salary and the civilian match is based on your civilian salary.  Let’s look at an example to help explain this.

Employee Civilian Salary - $100,000

Employee Military Salary - $75,000 (BRS participant)

2018 contributions from Military Basic Pay - $8,000

2018 BRS agency automatic contributions - $750 (1% of $75,000)

2018 BRS matching contributions – $3,000 (3% X $75,000 plus (.5) X 2% X $75,000)

Since this employee made a total of $8,000 in contributions in 2018, when they return to civilian service in 2019, they can still contribute up to $10,500 in makeup contributions for the time they were in a non-pay civilian status.  To continue with the example, let’s assume this employee contributed the maximum makeup contribution of $10,500.

2018 makeup contributions to civilian TSP - $10,500

2018 civilian automatic contributions - $250*

2018 matching contributions - $1,000*

 *Why only $250 and $1,000?  Let’s go into a little more detail.

Because this employee is also a BRS participant their civilian automatic and matching contributions are reduced by the amount of the service automatic and matching contributions.

The employee’s civilian salary is $100,000, and they made make-up contributions of $10,500 or 10.5% of their civilian salary.  Per matching rules, they receive 100% match on the first 3% ($3,000) and 50% match on the next 2% ($1,000) for a total match of $4,000.  However, through their BRS account, they already received $3,000 of matching contributions, so $4,000 minus $3,000 leaves them with a civilian matching contribution of $1,000.

Same goes for the automatic contributions.  The employee is entitled to the automatic contributions that would have been made in their Federal civilian position, or in this case 1%of $100,000 or $1,000.  However, they already received $750 in automatic contributions to their service account, leaving the difference of $250 to be made to their civilian account.

Some additional info on makeup contributions.  All makeup contributions must be made from future pay.  You cannot write a check for the amount of makeup contributions you missed.  While makeup contributions do not count towards your contribution limit in the year they are made, they are deductible for the year they are made.

Additional Benefits

Restored Forfeited Agency Automatic Contributions

  • If you did not meet the vesting requirements before being separated to perform military service and those contributions were forfeited, you can have them restored when you return to civilian service
  • To have them restored, you must notify the agency you work for and inform them that the contributions and earnings were removed and the agency must take actions to restore them

Returning Money Withdrawn From the TSP

  • If your TSP account balance was below $200 when you separated to perform military service, your account may have been automatically cashed out
  • When you return to your Federal civilian role, you may return the full amount of the cash payout (you cannot return a partial amount)
  • You must provide notice to the TSP within 90 days of returning to employment or your right to return the payment will expire

Resuming TSP Loan Payments

  • If you had a TSP loan for which payments were suspended when you entered a nonpay status, your agency must notify the TSP via Form TSP-41 of your return
  • The TSP will reamortize the loan, providing you a new payment plan amount and extending the time frame for repayment by your period of military service

Being a dual status employee entitles you to specific benefits with regards to your TSP.  While the benefits are relatively easy to understand, the calculations, limits, and rules can make it difficult to execute.  Make sure you understand your rights and do not hesitate to reach out to available resources to assist.  Your agency HR staff should be able to assist you.  If you know you have a military service coming up, let me know, and we can work together to devise a plan to ensure you take full advantage of the opportunities available to you.

 

 

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