Active Duty? Act Now or Your Roth TSP Contributions May Stop
By Abigail C. Reid, Federal Retirement Thrift Investment Board
If you’re an active duty member of the Army, Air Force, or Navy* making dollar-amount Roth contributions to your TSP account, these deductions will stop January 31, 2015, unless you act now.
How your election requirements have changed:
As of January 1, 2015, a change in myPay now requires 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 Roth contributions only; traditional contributions are already designated as a percentage of pay.
When the change took effect:
The new requirement took effect January 1, 2015. 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 in myPay.
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. You may also download the January 2015 version of Form TSP-U-1 from the Forms & Publications section of tsp.gov and return it to your service.
Why you should make the change:
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 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 both tax-free growth and tax-free withdrawals.
* Includes Navy Reserve component who serve more than 30 days on active duty.
- Written by Guest Blogger
- Category: Blog
- Published: 13 January 2015