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Thrift savings plan2013
- 1. THRIFT SAVINGS PLAN Lisa Hayes
- 2. What is the Thrift Savings Plan (TSP)? Retirement savings and investment plan FERS Employees One part of 3 part retirement package CSRS Employees/Uniform Service Supplement to annuity or retirement pay A defined contribution plan
- 3. TSP Accounts – Traditional vs. Roth Biweekly contributions deducted before taxes Defer paying taxes on contributions and earnings until withdrawal Matching contributions Biweekly contributions deducted after taxes Pay taxes on contributions as you make them Earnings can qualify as tax-free upon withdrawal No Matching contributions Traditional Contributions (pre- tax) Roth Contributions (after-tax)
- 4. Automatic Contributions New/Rehired employees are auto-enrolled to contribute 3% of basic pay Hired after July 31, 2012 FERS employees enjoy 1% Agency contribution Agency money; not deducted from your salary
- 5. Agency Contributions Agency Automatic (1%) Contribution Equal to 1% of basic pay Agency Matching Contributions (FERS employees) The Department matches up to the first 5% First 3% matched dollar-for-dollar Last 2% matched 50 cents on the dollar Not taken out of your pay CSRS participants do not receive matching
- 6. Employee Contributions Regular employee contributions Catch-Up contributions (employees 50 and older) All contributions are made via payroll deductions Elect, stop, change, or resume contributions at any time
- 7. 2013 Employee Contribution Limits Yearly dollar amount contribution limits Elected Deferral: $17,500 Applies to combined total of Roth and Traditional contributions Catch-up Contribution: $5,500 Calculated by the IRS; can change each year
- 8. Vesting Federal time-in-service requirement 3 years for FERS employees 2 years for Congressional and non-career employees Entitles you to Agency Automatic (1%) contributions and their earnings All Federal civilian service counts Driven by TSP Service Computation Date
- 9. Compounding Compoundin g is the most important part of your TSP Account growth.
- 10. Start Contributing Early Immediate contributions $200 monthly 6% Rate of Return 40 Years of Investing Account value at 65 $400,289 Waits 5 years to begin $200 monthly 6% Rate of Return 35 Years of Investing Account value at 65 $286,367 Employee 1 – Age 25 Employee 2 – Age 25
- 11. Moving Money Into the TSP Two methods to move money into your TSP account: Transfer or “direct rollover” Rollover Benefits include: Simplification Low Administrative Costs Easy Money Management
- 12. Methods of Moving Money Transfer IRA or plan sends all or part of money directly to TSP Rollover IRA or plan send YOU the money and YOU put it into the TSP yourself. You have 60 days from the date you receive funds Roll over all or part of money you receive
- 13. Transfer/Rollover Eligibility Must have an existing TSP account The money must be considered an “eligible rollover distribution” for Federal income tax purposes You can start a Roth balance with a transfer Must already have a traditional TSP account
- 14. Transfer/Rollover into Traditional Tax-deferred money: Traditional IRA’s SIMPLE IRA’s Eligible employer plans Use Form TSP-60 to transfer traditional money into TSP
- 15. Transfer/Rollover into Roth Transfers of qualified and non-qualified Roth distributions from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s Transfer of Roth funds will create a Roth account Must already have a traditional account Use Form TSP-60-R to transfer Roth money into TSP
- 16. Investing in the TSP The Lifecycle (L) Funds Individual Funds The Government Securities Investment (G) Fund The Fixed Income Index Investment (F) Fund The Common Stock Index Investment (C) Fund The Small Capitalization Stock Index (S) Fund International Stock Index Investment (I) Fund
- 17. G Fund Invested in short-term U.S. Treasury securities Rate set once a month by the Treasury Department Interest income without risk of loss of principal Managed by the Federal Retirement Thrift Investment Board
- 18. F Fund Tracks the Barclays Capital U.S. Aggregate Bond Index Government-backed bonds Corporate-backed bonds Mortgage-backed bonds “Debt Investing” Bonds Interest rates go down, bond prices go up Value of the F Fund goes up leading to positive returns
- 19. C Fund Replicates the Standard & Poor’s (S&P) 500 stock index 500 companies that represent the U.S. stock markets Contains many well-known household-name companies GE Microsoft Exxon Mobil Coca-cola
- 20. S Fund Tracks the Down Jones U.S. Completion Total Stock Market (TSM) Index Contains all common stocks actively traded in the daily U.S. stock markets Except those in the S&P 500 index Allows participants to invest in virtually the entire U.S. stock market by investing in both the C and S Funds
- 21. I Fund Replicates the Morgan Stanley Capital International (MSCI) Europe, Australasia, and Far East (EAFE) Index Broad international market index Made up of primarily large companies in 22 developed companies Share prices and returns reflect currency gains/losses
- 22. L Funds Invested according to a professionally designed mix of stocks, bonds, and Government securities Comprised of 5 existing (G, F, C, S, I) Funds Based on a “time horizon” The future date you plan to begin withdrawing money
- 23. L 2050 and L 2040 Funds L 2050 Fund Time horizon 2045 and later L 2040 Fund Time horizon 2035 thru 2044 Invested primarily in equities (C, S, and I Funds)
- 24. L Fund Investment Allocation L 2040 Fund L 2050 Fund 4% 9% 43%18% 26% G Fund F Fund C Fund 14% 9% 39% 16% 22% G Fund F Fund C Fund
- 25. L 2030 and L 2020 Funds L 2030 Fund Time Horizon 2025 thru 2034 L 2020 Fund Time horizon 2015 thru 2024 Invested primarily in the G, C and I Funds
- 26. L Fund Investment Allocation 41% 7% 28% 8% 16% G Fund F Fund C Fund L 2020 Fund L 2030 Fund 25% 8% 35% 13% 19% G Fund F Fund C Fund
- 27. L Income Fund For participants already or within 1 year of withdrawing their account Objective is to achieve a low level of growth with high emphasis on preservation of assets 74% 6% 12% 3%5% G Fund F Fund C Fund S Fund I Fund
- 28. TSP Loans: Basics Borrow money from your account while employed Your own contributions and their earnings Two types Must repay loan WITH interest usually thru payroll deductions FERS participants’ spouse must consent to TSP loan
- 29. Cost of a Loan $50 fee – deducted from loan amount disbursed Interest Rate G Fund rate at time application is processed Fixed for life of loan Not tax deductible Principal and interest repaid proportionally Both Traditional and Roth (if applicable)
- 30. TSP Loan Types May be used for any purpose Requires no documentation Repayment term of 1 to 5 years Purchase or construction of primary residence only Requires documentation Repayment term of 1 to 15 years General Purpose Residential Loan payments must start within 60 days of loan being disbursed.
- 31. Loan Limits Minimum loan amount $1,000 Maximum loan amount is the smallest of: Your own contributions and earnings from them; 50% of vested account balance or $10,000 (whichever is greater); OR $50,000
- 32. In-Service Withdrawals Financial hardship withdrawals Spouses’ rights apply Employee contributions terminate for 6 months No Agency Matching Contributions Age-based withdrawals Age 59 ½ or older Spouses’ rights apply Eliminates post- service withdrawal option
- 33. Financial Hardship Withdrawal Financial need must result from: Recurring negative monthly cash flow Medical expenses (unpaid or not covered) Personal casualty loss (unpaid or not covered) Legal expenses from separation or divorce from spouse Request must be for at least $1,000 No documentation required
- 34. Age-based In-Service Withdrawal Must be age 59 ½ or older One-time withdrawal All or specific dollar amount of account balance Minimum - $1,000 Can transfer all or a portion of withdrawal Prohibit you from receiving a partial post- service withdrawal after separation
- 35. Spouses’ Rights Loan and Partial Withdrawal FERS or Uniform Service participant Spouse must give written consent on withdrawal form Spouses’ signature must be notarized CSRS participant TSP must notify spouse in writing Consent/Notice must be given regardless of amount
- 36. Spouses’ Rights Full Withdrawal FERS or Uniform Service participant Spouse entitled by law to a joint life annuity with: A 50% survivor benefit, Level payments, and The no cash refund feature Unless spouse waives their right on the withdrawal form CSRS participant TSP must notify spouse in writing
- 37. Post-Service Withdrawal Partial Withdrawal Withdrawal of at least $1,000 and leave the rest One time only Full Withdrawal Single payment TSP monthly payments TSP life annuity Employees should use calculators from the TSP website to see if the monthly payments or the annuity is the best fit.
- 38. Death Benefits Form TSP-3, Designation of Beneficiary Must be used to designate payment of account Participant responsible for submission to TSP If TSP-3 is not received by TSP prior to death Account balance is paid according to Statutory Order of Precedence TSP will NOT honor a Will or any other document
- 39. Statutory Order of Precedence In the event of death, there is no TSP-3 on file with TSP: 1. Spouse 2. Natural and adopted children 3. Parents 4. Estate 5. Next of Kin
- 40. Leaving Money in the TSP No more contributions after separation Can transfer in from traditional IRA’s or eligible employer retirement plans Can continue to request interfund transfers By April 1 after you turn 70 ½ and are separated You must begin receiving required minimum distributions
- 41. Questions
Notes de l'éditeur
- *TSP is a retirement saving and investment plan for Federal Employees and Uniformed Service Members*It was established by Congress in the Federal Employees' Retirement System Act of 1986 and offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans.*The retirement income you receive from your TSP account will depend on how much you (and your agency, if you are eligible to receive agency contributions) put into your account during your working years and the earnings accumulated over that time.*As of 2011 year you can contribute to both the traditional TSP and/or the Roth TSP. With the traditional it ultimately means that you have more money in your paycheck each pay period and with the Roth you have less. *Agency Contributions – Employees receive an automatic 1% plus up to 5% matching depending on what the employee contributes.
- *If an employee chooses Roth contributions, their account. will be made up of two separate balances; Traditional/Roth, because you can not transfer money from a traditional account to a Roth. *You can make contributions to both Traditional and Roth TSP accounts.*Roth earnings are tax-free if 5 years have passed since January 1 of the calendar year in which you made your first Roth contribution and you have reached age 59 ½, have a permanent disability, or have died. *The 5% matching contributions do not apply to Roth contributions only Traditional contributions.
- *If you are a FERS employee and you were hired before August 1, 2010, you already have a TSP account with accruing Agency Automatic(1%) Contributions. In addition, you can make contributions to your account from your pay and receive Agency Matching Contributions.*If you are a FERS employee hired after July 31, 2010, your agency has automatically enrolled you in the TSP, and 3% of your basic pay is deducted from your paycheck deposited in the traditional TSP account, unless you have made an election to change or stop your contributions.*However even if employees still do not wish to contribute they will receive the 1% contribution.
- *Every pay period the Gov’t will deposit a guaranteed 1% equal to your basic pay into your TSP acct. that does not come out of your pay.*MATCHING – FERS employee you will receive matching contributions on the first 5% they contribute every PAY PERIOD. The first 3% is matched dollar for dollar by the Department and the other 2% is matched at 50 cents on the dollar. If you plan to max out (contribute the full deferral limit of $17,500) this year, but sure to calculate your biweekly contributions through the full 26 pay periods. Even if you aren’t sure how much to contribute, start with 5% so that you are taking advantage of full agency matching. Agency Automatic 1% + 4% Agency Matching = 5%; that means that if you contribution just 5% of your own earnings to the TSP, the Department will also contribute 5% to make a combined total contributions of 10%. You have doubled your contributions simply by contributing and being a FERS employee.
- *Regular and * Catch-Up. However there are now two tax treatments of your contributions; and those are Traditional , which is (pre-tax) and Roth, which is (after-tax)Contribution changes of any kind should be made using Employee Express. 1 exception: new employees that wish to opt out of TSP can submit the TSP-1 Form to stop the auto-enroll 3% contribution. When making changes be sure to monitor the change. To make sure the change has taken effect.To qualify tomake catch-up contributions, you must: -- be age 50 or older, or will turn 50 in the calendar year the contribution is deducted from pay; -- be in a pay status; -- not be in a 6-month non-contributory period after taking a financial hardship withdrawal; and -- self-certify that you will make the maximum regular TSP contributions (this year it’s $17,500) for the year in which you are making the catch-up contributions.
- The Internal Revenue Code (I.R.C.) places limits on the dollar amount of contributions you can make to the TSP.Each year the regular contribution limit goes up at least $500; 2011 it was $16,500. This is solely employee contributions and does not include the Agency Matching.
- *Vesting – Means that you have served as a federal employee for at least 3 years; service does not have to be consecutive or just since employees became a TSP participant. If you leave w/out being vested and never return to federal service you are not entitled to any of the earnings or contributions. If you die before separating from service, you are automatically considered vested and all the money in your acct.You are always vested in your own contributions and their earnings and in your Agency Matching Contributions and their earnings.
- Information in this chart assumes an annual salary of $40,000, employee and agency contributions of 5% each, and a 6% average annual rate of return.You don’t just make money on the contributions that you make, you make money on the money that your money makes!! The longer you have your money in your account the more time it has to make money. This is the power of compounding…start early!!
- Transferring or Rolling over your accts. Into the TSP allows you to consolidate your retirement savings in one place. The administrative fees for TSP were 27 cents per $1000 in your account in 2012…that’s .027%. What’s do administrative fees cover and why is it important?? Administrative fees (the cost of administering the program) include management fees for each investment fund and the costs of operating an maintaining the TSP’s record keeping system, providing participant services, and printing and mailing notices, statements, and publications. They are paid primarily from the forfeitures of Agency Automatic (1%) Contributions of FERS employees who leave Federal service before they are vested. The average expense ration for defined contribution plans is .83%, or $8.30 per $1000 (Deloitte, “Inside the Structure of Defined Contribution/401K Plan Fees” Investment Company Institute, 2011)
- TSP cannot accept transfers or rollovers of Roth IRA’sYour transfer or rollover will be invested in the TSP according to your latest contribution allocation on file.
- NOTE: A SIMPLE IRA stands for Savings Incentive Match Plan for Employer. Employer-sponsored retirement plan available to small businesses.
- The five L Funds are:L 2050—For participants who will need their money in the year 2045 or later.L 2040—For participants who will need their money between 2035 and 2044.L 2030—For participants who will need their money between 2025 and 2034. L 2020—For participants who will need their money between 2015 and 2024. L Income—For participants who are already withdrawing their accounts in monthly payments, or who plan to need their money between now and 2014.
- Governments and companies borrow money by selling notes or bonds. The issuer is obligated to pay the investor the face value of the security (purchase price) at a set time (maturity date). Until that date, investors receive interest (typically twice a year) generally at a fixed rate per year (coupon rate).**Conversely – When interest rates go up, bond prices go down; the value of the F Fund goes down and lead to negative returns (losses)
- Stock prices are expressed in the currency of each respective country and then converted to U.S. dollars to determine the value of the EAFE Index. This means that as the value of the dollar falls relative to the currencies of the countries in the EAFE, the prices of the stocks in the EAFE, expressed in U.S. dollars, and the value of the EAFE index, will rise…and vice versa.Domestic and international stock markets don’t always move at the same time or in the same directions. Diversifying investments between the C and I Funds can result in losses in on e market being cushioned by gains in the other market.
- TSP began offering the L Funds to plan participants August 1, 2005.-Geared toward participants who do not have the time, interest or experience to manage their TSP retirement savings.**I’m in the No time, interest or experience category…I’d rather let the professional investors make me money.
- The interest rate for your loan is the G Fund rate at the time your application is processed.Spouses’ rights. If you are a married FERS or uniformed services participant, your spouse must consent to your loan by signing the Loan Agreement. If you are a married CSRS participant, your spouse will be notified of your loan. These rules apply even if you are separated from your spouse.
- The TSP also charges a processing fee of $50 for each loan. This fee is used to cover the cost of processing and servicing your loan. It is deducted from the amount of the loan that you receive.Waiting period between loans. You must wait 60 days from the time you pay off one loan until you are eligible to request another loan of the same type.
- There are two types of In-service Withdrawals: Financial Hardship and Age-Based.You are not allowed to contribute to TSP for 6 months after a hardship withdrawal. If FERS, you will not receive any of the matching contributions. Withdrawal from TSP account while still employed without having to pay it back.
- When you complete your application, you will be required to certify, under penalty of perjury, that you have a genuine financial hardship.Your financial hardship withdrawal is subject to Federal income tax and, in some cases, state income tax. If you are younger than 59½, you may have to pay a 10% early withdrawal penalty tax. Any tax-exempt or Roth contributions included in your withdrawal are not subject to Federal income tax; neither are any qualified Roth earnings.
- If you are married, the law grants your spouse certain rights regarding your TSP account as described in the Federal Employees' Retirement System Act of 1986. Spouses' rights apply even if you are separated from, but still married to, your spouse.
- There are two types of Withdrawal option after separation.If you made an age-based in-service withdrawal, you are not eligible for a partial withdrawal.A little note on withdrawals in general: In-service or post-service, partial or full: If you choose to receive a single payment, paid to you: In addition to the mandatory 20% Federal income tax that is withheld, you are likely to be subject to a 10% early withdrawal penalty tax as well. This early withdrawal penalty tax will NOT apply if you are 59 ½ or older when you receive the payment. However, separate/retire during or after the year you turn 55, you are also NOT subject to the early withdrawal penalty tax. Exceptions to the early withdrawal penalty are: total and permanent disability, Purchase of a TSP annuity, Death Benefits payout or Life Expectancy payments.
- Beneficiary(ies) must be designated on the TSP-3 form. A Separate TSP-3 must be completed and submitted is a participant has both a civilian and uniformed service TSP account.Beneficiary forms must be sent directly to TSP and must be signed, witnessed, and received by the TSP on/or before the date of an employees death. The address is listed on the 1st page of the form. Funds will be paid directly to the beneficiary(ies) only!!!
- If your child predeceases you, his or her share will be divided equally among his or her children.Please note that stepchildren are not included unless they have been formally adopted. Likewise, a stepparent is not included unless they have formally adopted you.A will is not a substitute for a Designation of Beneficiary form – the TSP will