By Mike Miles
TSP matching funds
March 26th, 2013 | Uncategorized
Q. I am a federal law enforcement officer covered by FERS and, by Sept. 30, I will have more than 29 years of service plus more than a year of sick leave. To obtain my annuity beginning Oct. 1, I would like to retire on Sept. 30, but it is in the middle of a pay period. I plan on front-loading my Thrift Savings Plan and TSP catch-up contributions starting in April for the rest of this year to reach the maximum for both. Would there be any TSP match in my last, partial pay period, or should I just aim to reach my TSP limits in the previous complete pay period?
A. There will be matching on every pay period.
Tags: annuity, catch-up contributions, FERS, law enforcement, matching funds, retirement, sick leave, TSP
Combat-zone tax-exempt contributions
March 19th, 2013 | Uncategorized
Q. I have both a civilian and military Thrift Savings Plan account because I was mobilized for part of 2011-12. Because I was in a combat zone, much of my income was tax exempt (CZTE). The military allowed me to contribute that tax-exempt income into my TSP. It is not a tax deduction because the income wasn’t taxable in the first place.
However, they also made contributions from my taxable income. I thought it was all from my CZTE. When I returned to my civilian job, I began to contribute and maxed out my contributions, not knowing about the earlier tax-deductible contributions.
Obviously, I over-contributed and just paid the income tax on the “overage.” But that overage is still in the TSP account.
Military: $7,450
CZTE: $13,464
Civilian: $17,540
Catch-up: $5,474 (Roth)
1. How is that taxable (and taxed) overpayment treated within TSP?
2. Can I combine my military and civilian accounts?
3. If combined, can I move the CZTE money into my Roth TSP?
4. Can I move the “overage” that I have now paid taxes on into the Roth, as well?
Both of the amounts I want to move into the Roth have been taxed or were tax-exempt when earned.
A. The usual limits do not apply to TSP contributions from CZTE pay; they only apply to contributions from taxable basic pay, incentive pay, special pay and bonus pay. The Annual Additions Limit under IRC 415c does apply, however, and it limits the total contributions from all sources to $51,000 for 2013. My guess is that the money was just rearranged in the TSP to fall under the applicable limits for the various types and that you do not, in fact, have excess contributions in your accounts. You may combine your military and civilian accounts as long as you are separated from service covering at least one of the accounts and there are no CTZE contributions left in the military account. Those must be withdrawn first, or they money will be distributed to you when your request to combine the accounts is processed. The CTZE money in the traditional TSP account cannot be transferred to the Roth TSP.
Tags: catch-up contributions, contribution limit, deduction, income, military, Roth TSP, tax-exempt status, transfer, TSP
12 questions on VERA
March 19th, 2013 | Uncategorized
Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service.
If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year,
1. Would I begin my annuity immediately?
2. Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28)
3. Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?)
4. Would I receive the special retirement supplement beginning at age 56 (my minimum retirement age), and receive it until I reach age 62?
5. Would I be able to continue carrying my current health and life insurance at non-USPS rates? (I couldn’t find how long these could be carried. Until death?)
6. Could I begin receiving Social Security as early as age 62?
7. Any withdrawal from my Thrift Savings Plan prior to age 59½ would be penalized 10 percent as per Internal Revenue Service regulations? (Can I continue to contribute to TSP after retirement?)
8. As a FERS annuitant, is there no limit to what I can earn after separation from the Postal Service as it pertains to my annuity payment?
9. At age 56 (my MRA), the special retirement supplement from Social Security would begin and would be subject to yearly income limits. Would supplement payments be reduced by approximately $1 for every $2 I earned above that year’s Social Security income limit?
10. At age 65, I’d be eligible for Medicare parts A and B? (Would this affect my health insurance coverage through Federal Employees Health Benefits?)
11. Would there be cost-of-living increases at any point for my annuity?
12. Is there a date during the year that maximizes the benefits of retirement?
Did I get this right, and are there any other things I should know before considering a VERA if it is offered?
A. Reg: 1. Yes.
2. Yes.
3. Yes. Half of your unused hours of sick leave would be added to any hours of service that were left over when your annuity was computed. Any additional months created would increase the amount of your annuity. Any unused annual leave would be paid to you in a lump sum at your current hourly rate.
4. Yes.
5. Yes. And those enrollments would continue until your death.
6. Yes.
Mike: 7. You will be subject to the early withdrawal penalty until you reach age 59½ unless you can qualify for one of the exceptions listed on Page 7 of the notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You may not contribute to the TSP after you retire, but you may transfer eligible balances into the TSP from other retirement accounts such as IRA, 401(k), 403(b), etc.
Tags: 401(k), 403(b), age, annual leave, annuity, catch-up contributions, cost-of-living adjustment, early withdrawal penalty, FERS, health insurance, income, IRA, IRS, life insurance, lump-sum, Medicare, Minimum Retirement Age, Postal Service, sick leave, Social Security, Special Retirement Supplement, TSP, VERA
Contribution limits for partial years
March 11th, 2013 | Uncategorized
Q. My husband will be retiring in June 2014. He will turn 50 in March 2014. Can we still contribute the full $17,500 plus $5,500 catch-up (I realize next year contribution limits may increase) even if he is only in for half a year?
A. Yes, as long as his pay will support the deferrals. The limits are not adjusted for partial years.
Tags: catch-up contributions, deferred, maximum contribution, partial, retirement, TSP
TSP, IRA and Roth contribution limits
February 27th, 2013 | Uncategorized
Q. I am over 50, my wife (unemployed) is under 49. In 2013, if I contribute the maximum amount (including catch-up) of $23,000 to my Roth TSP and traditional Thrift Savings Plan, can I also contribute the maximum of $6,000 to a Roth IRA or traditional IRA for a total contribution of $29,000? Can I also contribute the maximum of $5,000 for my wife into a Roth IRA or traditional IRA for a total contribution of $34,000, assuming that I fall within the adjusted gross income limits as addressed by the Internal Revenue Service? If there are limitations on contributing to a Roth IRA or traditional IRA when active in the TSP, what are they?
A. Subject to the income limits outlined in IRS Publication 590, you may contribute to the TSP and an IRA or Roth IRA.
Tags: catch-up contributions, income, IRA, IRS, maximum contribution, Roth IRA, Roth TSP, spouse benefits, TSP
Roth contribution and age
February 20th, 2013 | Uncategorized
Q. The Thrift Savings Plan allows contributions this year of $17,500 plus a $5,500 catch-up, whether to Roth or traditional IRA. Internal Revenue Service rules also allow (for certain income brackets) a Roth contribution of $5,000 plus $1,000 catch-up. Can a person over the age of 55 make the $6,000 Roth contribution allowed under IRS rules to a secondary Roth IRA and still make the difference ($13,000) in a contribution to the TSP?
A. You are always free to make the full Roth TSP contribution. It’s your eligibility to make the Roth IRA contribution that may be limited, depending upon your tax filing status and your income. See IRS Publication 590, which includes a worksheet to determine your Roth IRA contribution eligibility, for the rules.
Tags: age, catch-up contributions, income, IRA, IRS, maximum contribution, Roth IRA, TSP
Roth, Roth TSP and contribution limits
February 20th, 2013 | Uncategorized
Q. I am covered under CSRS. Can I still open an external Roth account and contribute the $6,000 maximum (plus catch-up)? If so, how would contributing to the Roth TSP interact with contributing to the external Roth?
A. The limits for the two are separate, but your eligibility to contribute to a Roth IRA depends upon your tax return for the year. If your income is too high, your Roth IRA contribution eligibility will be phased out. There’s a worksheet in IRS Publication 590 that will help you determine your eligibility.
Tags: catch-up contributions, CSRS, IRS, maximum contribution, Roth IRA, Roth TSP
Roth IRA contribution limit
February 18th, 2013 | Uncategorized
Q. I am a federal employee under CSRS and over the age of 50. I understand that the 2013 contribution limit for TSP is $17,500 plus an additional catch-up contribution of $5,500, for a total contribution limit of $23,000. My question concerns contributions also made to a Roth IRA account outside the Thrift Savings Plan. For the general public, I understand if you are under the Internal Revenue Service income limit, you can contribute $5,000 plus a $1,000 catch-up contribution to a Roth IRA. I am under this income limit. Therefore, can I contribute the $6,000 to my Roth IRA outside TSP and still contribute to the TSP, as long as I limit my contribution to the TSP to no more than $17,000 ($23,000 limit less $6,000)? Also, can my TSP contribution be made to the regular IRA even though my outside contribution is made to a Roth IRA?
A. The limit applies to IRA contributions, and not to your TSP contributions. If you participate in an employer-sponsored retirement plan, like the TSP, your eligibility to contribute to an IRA or a Roth IRA may be limited by your filing status and your income. Calculators to determine this eligibility are available all over the Internet, or you can check with a qualified tax preparer.
Tags: catch-up contributions, contributions, CSRS, income, IRS, retirement, Roth IRA, taxes, TSP
Roth TSP limits
December 14th, 2012 | Uncategorized
Q. There is around a $5,000 annual limit to a Roth IRA based on income and age. Does that limit apply to TSP? In other words, can I put all $17,500 plus the $5,500 catch-up contributions for those age 50 and older into the Roth TSP and pay taxes on it now, rather than later regardless of my income? I am a civilian over 50 years old in FERS.
A. The Roth IRA limit does not apply to Roth TSP contributions.
Tags: age, catch-up contributions, FERS, income, Roth IRA, Roth TSP, taxes
Matching contributions
December 10th, 2012 | Uncategorized
Q. I plan to retire under FERS law enforcement on May 30, contributing my full $17,500 and $5,500 catch-up contribution in my first 10 to 12 paychecks. If I purposely make larger contributions early in the year in an attempt to reach the annual maximum contribution before retiring, will I lose out on agency matching contributions?
A. Not if you spread the contributions out evenly over the duration of your remaining employment.
Tags: catch-up contributions, FERS, law enforcement, matching funds, maximum contribution, retirement