The Federal Retirement Thrift Investment Board recently announced an increase in the 2009 elective deferral limit for regular Thrift Savings Plan contributions. The limit is now $16,500, up from $15,500 for 2008. The Thrift Savings Program (TSP) is the government's long-term retirement savings plan (GovSpeak for 401K), which gives military and civilian  employees the opportunity to invest for retirement while lowering their tax liability each year. Taxes on that income are deferred until the employee withdraws from the account after retirement.

Tax Year 2009 will begin on December 21, 2008 and will end on December 19, 2009.  Plan to use Employee Express (EEX) or myPay before December 20, 2008, to make changes to the amount of your TSP contribution for the coming tax year.

Not sure how much you should contribute to TSP? Use the handy TSP Calculator. Go to the bottom of the webpage and click on the start button.

If you're in FERS, you should spread your contributions over the full 26 pay periods to maximize your Agency Matching Contributions. If you reach the IRS limit of $16,500 too soon, your own contributions will stop. You receive Agency Matching Contributions only on the first 5% of your base pay that you contribute each pay period so you'll squeeze more out of Uncle Sam if you have a contribution each pay period.

Example to follow for deducting equal payments:
Effective Date: December 21, 2008
Number of Pay Periods in tax year: 26
Pay Period Deduction Amount: $635
(i.e. $16,500/26 = $635 rounded up)

Thrift Savings Plan Over 50 Catch-Up Contributions

If you're age 50 or older and you're contributing the maximum amount allowed by IRS ($16,500), you may elect to contribute an additional $5,500 to your TSP account for Tax Year 2009.  Use EEX or myPay to make Catch-Up Contributions.


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