Thread: Guard Against Hitting TSP Dollar Cap

Greetings All,

This time of year is a good point for higher-paid FERS employees
to check to make sure they won't lose government contributions due
to hitting the annual investment dollar cap too early. The annual
TSP investment dollar cap in 2006 is $15,000. Since the lifting
of the old percentage limits on investing, some employees have
chosen to invest at high rates early in the year in order to get
their money in the TSP sooner and take advantage of potential
tax-advantaged growth for longer periods. FERS employees who have
been doing so might want to examine their situation around now.
FERS employees should take care to structure their investments so
that they can continue investing at least 5 percent of salary--the
amount that produces the maximum government contribution--through
every pay period of this year.

If FERS investors hit the dollar cap before the last pay period of
the year, their contributions will shut off until 2007 and so will
government matching contributions (although the automatic 1 percent
of salary government contribution for FERS employees would continue).
Once lost, matching contributions can't be recouped. There is no
similar consideration for CSRS investors, who get no government
contributions in any event.

SWSOP