Bill hoff said There will be a change to the catch-up contributions process implemented for the federal Thrift Savings Plan (TSP) at the beginning of next year.
The catch-up contribution is an additional contribution limit amount offered to those that turn 50 this year or older. If or once they reach the standard TSP contribution limit, they can make catch-up contributions if they enroll for it.
However, the agency in charge of the TSP, FRTIB (Federal Retirement Thrift Investment Board), wants to reduce the number of forms that older workers have to fill out regarding contributions. Next year, the allocation of money to the TSP will all be in one form.
Bill hoff said Next year, if the individual elects for catch-up contributions, the TSP will automatically have the eligible participant start contributing to the catch-up contributions.
Catch-up contribution was put into place a few decades back to give older workers the chance to put more money into their TSP accounts, as they’d started their careers before the TSP was born in the late 80s.
This additional contribution limit let the employees make up the years they did not have the TSP to invest in.
Though that was the reason behind catch-up contributions, the process still goes on today to give employees more opportunity to save as much as possible for their retirement years.
Currently, the payroll process for catch-up contributions has been on separate payroll records than the standard contribution records. Next year, it will not be added to the same payroll records that are utilized to submit other contributions.
In 2021, the recordkeeping system for the TSP will automatically know if the account holder is eligible for catch-ups by their birth year. Once the system sees that the eligible individual has reached the standard contributions limit, it will acknowledge the contribution as a catch-up. There will be no forms or separate payroll records needed in this new process.
