2021 Will Bring Change to Catch-Up Contribution Procedure by Jennifer Vernon
In 2021, the proposal to make the catch-up contribution process easier will be implemented. This will affect those that are at least 50 and older that reach their maximum yearly contribution limit, explained by Jennifer Vernon.
Jennifer Vernon said At this time, TSP account holders that are eligible for catch-up contributions need to enroll by filling out a Catch-up Contribution Election Form. This is an additional form on top of your usual contribution election documents.
Once this form is sent in and put through, the agency employer will start submitting these catch-up contributions to the TSP for the account holder. The payroll records that these agencies utilize to send these contributions are separate from the standard payroll records that are used for other contributions.
Under this system, Thrift Saving Plan account holders are required to state that they intend to make the IRC 402(g) elective deferral limit to be eligible for making catch-up contributions. However, there are agencies and account holders that completely understand this. If participants make catch-ups without making the elective deferral limit, they may lose out on matching contributions.
This current system will continue until the end of this year.
The new system will kick off on the 1st of January of next year.
Jennifer Vernon by In the new processing system, account holders will not have to submit a separate election to make catch-up contributions.
Agencies will now submit these catch-up contributions on the same payroll records utilized for other standard contributions. The contributions will automatically switch toward catch-up contribution limits once the eligible participants meet the elective deferral. To be eligible, account holders must be in the year they are turning 50 or older,
This year, the yearly standard contribution limit for the Thrift Savings Plan is $19,500, along with $6,500 more for those able to put in catch-up contributions. Those that are eligible will be able to save $26K this year towards their retirement.
Next year’s limits will be released later in the year.
