Ask The Experts: Money Matters

By Mike Miles

Depositing post-tax money into TSP

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Q. My wife is a federal employee with 28 years of service and is covered by FERS. She plans on retiring soon, and we have heard that she can take funds (post-tax) and dump them into the Thrift Savings Plan equaling the cumulative difference through the years of what she was unable to put into the TSP. Can you shed any light on this info?

A. You may not ever deposit post-tax money into a TSP account, and, except for Federal Erroneous Retirement Coverage Corrections Act cases, there is no provision to make up past contributions that could have been made but were not.

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FERCCA

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Q. I retired in 2010 and, at that time, I was informed that I was in the wrong retirement system (FERS). I chose to be put in the proper program (CSRS Offset). I was also told by my human resources manager that, since I was in retirement, I would be able to keep all of my Thrift Savings Plan contributions, including the agency’s matching contributions. On Dec. 3, the agency forfeited about a fourth of the value of my TSP account, without any notification that this was going to happen. Is this a legal action? Why was I not informed with a letter that this was going to happen?

A. I’m not a judge, so I won’t comment on the legality of what has happened, but I have consulted on more than one Federal Erroneous Retirement Coverage Corrections Act case, and this is consistent with my expectation. You would not have been entitled to the FERS employer contributions under CSRS Offset, and so they are typically recaptured when you retroactively switch to CSRS from FERS.

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FERCCA

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Q. I am 56 years old and just found out that I should be in CSRS Offset, not FERS.  I’ve paid into my Thrift Savings Plan for more than 10 years. How does this affect my TSP contribution?

A. If you are erroneously covered by FERS and you choose to move out of FERS, the Federal Erroneous Retirement Coverage Correction Act allows you to keep the employee contributions you made in your TSP account (plus the earnings attributable to your contributions) even if the contributions exceed 5 percent of the basic pay you earned for the pay period that contributions had been made. However, all government contributions that were made to your account and the attributable earnings must be removed from your account if you do not choose FERS.

If you choose FERS coverage under FERCCA, you may make up those employee contributions that you could have made had you been correctly covered by FERS, as provided by the current TSP error correction legislation. In addition, you will receive the agency automatic (1 percent) contributions and agency matching contributions that you should have received had you been correctly covered by FERS. Finally, you will receive lost earnings on both your employee and agency make-up contributions. (Prior to FERCCA, lost earnings were payable only on agency make-up contributions.) The lost earnings on both employee and agency contributions will be determined the same way lost earnings are now determined on agency make-up contributions (that is, as provided by the current TSP regulations).

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Switching to CSRS offset under FERCCA

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Q. I was recently informed that I fell under the Federal Erroneous Retirement Coverage Corrections Act and had an option to select CSRS Offset. I was also told that the 1 percent and matching in my Thrift Savings Plan would be removed if I selected CSRS Offset. My human resources office told me that it would be the exact amount that was put into my TSP. If it made money, I would be able to keep the difference; if it lost money, I would have to make up the difference. So I selected CSRS Offset. Now they are beginning to remove the 1 percent by pay period, but they are removing the amount plus interest. I also have a colleague who was told the same, but they are only removing the actual amount and not interest. What are they supposed to be removing from the TSP if you switch from FERS to CSRS Offset under FERCCA?

A. It’s not that simple. In fact, the FERCCA rules for this are pretty complex. The answer depends upon your particular circumstances.

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FERCCA employee switching to CSRS Offset

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Q. I have elected to switch to CSRS under FERCCA. I understand I will be given the option of the refund of my portion of Thrift Savings Plan contributions. When I left the Postal Service after my first seven years in the 1980s, I withdrew my CSRS money. If I take the refund of my portion of TSP deposit over the CSRS maximum contribution, can I pay back the withdrawn CSRS money without tax implications?

A. The refund of your TSP contributions will be taxable, since you never paid taxes on the money when you earned it. You may then use after-tax money to make a CSRS redeposit, which is not tax-deductible.

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Wrong retirement system?

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Q. I may be in the wrong retirement system (CSRS). If I am, are there any companies that can guide me to decide between CSRS offset and FERS under the Federal Erroneous Retirement Coverage Corrections Act?

A. Yes. I have capabilities and experience in this area (I provided decision support in one of the largest FERCCA cases on record) and will be happy to discuss your situation with you. You may contact me directly through www.variplan.com.

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Agency matching funds and TSP loans

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Q: Do you know of any provisions in the Federal Erroneous Retirement Coverage Corrections Act that allows one to get a Thrift Savings Plan loan with agency matching funds in their TSP account? In April, while employed with the Department of the Army, the Army Benefit Center informed me that I was entitled to retirement plan corrective action under FERCCA. In July, I submitted my FERCCA election form to enroll me into Civil Service Retirement System Offset retirement coverage from the Federal Employees Retirement System. ABC sent letters to my previous employers notifying them of this change and informing them that they need to remove any agency matching funds and the automatic one percent from my TSP account. I understand this part of the process. However, recently I attempted to get a TSP loan and was told that I am not eligible for a loan because I have agency matching funds in my TSP account. The matching funds are there from when I was covered under FERS, and workers covered under CSRS are not eligible for agency matching funds. It’s been six months since my retirement plan changed and I still cannot borrow my own money.

A: I know of no such provisions. You should contact your employing agency and/or the TSP for further advice on how to have the excess employer contributions removed from your account.

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