Thrift Savings
Plan
By
Eric MorrisThrift savings plan or TSP are tax deferred
retirement savings and investment plans administered
by the Federal Retirement Thrift Investment Board or FRTIB for federal employees. Thrift savings plans
work on the same principle as 401 (k) plans offered
by many private employers. All the employees who
fall under the Federal Employees Retirement System
or FERS and the Civil Service Retirement System or
CSRS are eligible to participate in TSP. There are
different requirements specified for both FERS and
CSRS groups. Federal employees have to make
voluntary contributions to their TSP accounts.
Additionally, these contributions are not in any way
considered a part of their regular FERS Basic
Annuity or CSRS annuity contributions.
Thrift savings plans are also known as defined
contribution plans, because the retirement income
obtained from the TSP account depends on the
contribution made by employees or their agencies
during working years. The earnings accumulated
through these contributions also affect the
retirement income incurred. FERS employees are
entitled to thrift savings plan as an essential part
of their entire retirement package, besides the FERS
Basic Annuity and Social Security plans. For CSRS employees, a thrift savings plan is
not included as a necessary part of the retirement
plan, but rather as a supplement to CSRS annuities.
[Updated: You may elect to contribute any dollar
amount or percentage (1 to 100) of your basic pay.
However, your annual dollar total cannot exceed the
Internal Revenue Code limit, which is $16,500 for
2009 and $16,500 for 2010]. This option is available as soon as they
join federal employment. Benefits such as Agency
Automatic (1%) Contributions, Agency Matching
Contributions and immediate vesting in these
contributions are also simultaneously activated. CSRS participants are eligible to contribute to their TSP accounts,
but
they do not receive any agency contributions.
For all types of participants, thrift savings
plans offer immediate employee contributions,
before-tax savings and tax-deferred investment
earnings, low administrative and investment expenses
and a choice of five investment funds. These five
investment funds are Government Securities
Investment (G) Fund, Fixed Income Index Investment
(F) Fund, Common Stock Index Investment (C) Fund,
Small Capitalization Stock Index Investment (S)
Fund, and International Stock Index Investment (I)
Fund. [Updated: Or you can choose one of the
L-funds, which diversifies your account allocation
for you using the other five funds, and is tailored
to different time horizons.]