Active Duty? Your Roth TSP Contributions May Stop Unless You Act

By Abigail C. Reid, Federal Retirement Thrift Investment Board

If you are an active duty member of the Army, Air Force, or Navy making dollar-amount Roth contributions to your TSP account, these deductions will stop on January 31, 2015, unless you act.

How your election requirements will change:

An upcoming change in myPay will require you to designate your Roth contributions as a percentage of your pay, not a dollar amount. If you don’t comply with this change, then the Defense Finance and Accounting Service (DFAS) will not be able to process your Roth contributions. This change affects your Roth contributions only; your traditional contributions are already designated as a percentage of pay.

When the change will take place:

The new requirement will take effect January 1, 2015. You will have 30 days to change your Roth election from a dollar amount to a percentage of your pay. If your new Roth election is not received by January 31, 2015, then DFAS will not be able to process your Roth contributions until you update them.

How to make the change:

Log into myPay. You'll see a special TSP section called “Traditional TSP and Roth TSP”—click there. Then, in the “Contribution from Roth TSP” section, you can enter the percentage of your pay that you’d like to contribute (10%, for example). Finally, click “Save” at the bottom of the screen.

Why Roth contributions might be good for you:

When you make Roth contributions, you pay taxes on the money you save before it goes into your TSP account. So you pay no income taxes when you take it out, and your earnings can also be tax-free if you have reached age 59½ or have a permanent disability and five years have passed since the year of your first Roth contribution.

As a member of the uniformed services, you can make Roth contributions from tax-exempt pay, basic pay, incentive pay, special pay, and bonus pay. If you make Roth contributions from tax-exempt pay earned in a combat zone, you won’t pay taxes on your contributions, and you’ll have the opportunity for tax-free growth.

Tip of the Day

  • Written by Guest Blogger | September 30, 2014

    The Thrift Savings Plan (TSP) offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans. Sign up or get more info at tsp.gov

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