Thrift investment board ups '07 TSP contribution limits

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The Federal Retirement Thrift Investment Board has announced a $500 increase in regular Thrift Savings Plan contributions to $15,500 for 2007 elective deferral maximum contributions.

"TSP is a long-term retirement savings plan, which everyone should consider," said Janet Thomas, a human resources specialist at the Air Force Personnel Center here. "It's a great supplement to military and civilian retirement plans."

TSP offers investors the chance for lower taxes each year they contribute, and taxes are deferred until the employee withdraws the account after retirement.

"Investment money is deposited directly from each paycheck so you never have to think about it. That makes it easy to 'pay yourself first' while only investing what you deem appropriate," said Ms. Thomas.

Catch-up contributions are additional tax-deferred contributions, separate from regular TSP contributions. For those who are eligible, catch-up contributions provide a way for individuals to secure their retirement if they began investing late in life.

To be eligible for catch-up contributions, civilian and military employees must be age 50 or older in the year in which the first deduction from pay occurs, be in a pay status and must be able to certify they will make (or have made) the maximum "regular" employee contributions of $15,500 to a TSP or other eligible account by the end of 2007.

The "other" type of eligible account could be a uniformed services TSP account or another eligible employer plan, such as a 401(k). Employees must also not be in the six-month non-contribution period following a financial hardship in-service withdrawal.

Catch-up contributions automatically stop with the last pay date in the calendar year or upon reaching the maximum catch-up dollar limit for the year, whichever comes first. Eligible employees must submit a new election for each year they wish to participate.

Regular TSP contributions stop when an employee's contributions reach the annual maximum limit and then automatically resume the next calendar year.

Investing in TSP is not limited to stocks. People can choose safer government securities or invest in the Lifecycle Funds.

Some specifics of the program include:

Military
-- Airmen may contribute any whole percentage of basic pay, as long as the annual total of tax-deferred investment doesn't exceed $15,500 for 2007. May also invest all or part of bonuses, special pay or incentive pay, as long as the member contributes from basic pay. Members may enroll in December; however, requested actions will not update until Jan. 1.

-- Those serving in tax-free combat zones are allowed up to $45,000 in annual contributions for 2007. The $45,000 total includes the tax-exempt combat zone contributions and the regular deferred contributions.

-- Military members can enroll or change their regular TSP contribution amount through the Defense Finance and Accounting Service Web site at https://mypay.dfas.mil/mypay.aspx or by filling out a form TSP-U-1 Election Form at local military personnel flights and finance offices.

-- Eligible members can enroll to make catch-up contributions at local military personnel flights and finance offices by filling out a Form TSP-U-1-C, TSP Catch-Up Contribution Election.

-- Contribution allocations (how an employee chooses to invest money among the investment funds) can be made by calling the TSP automated ThriftLine (877) 968-3778 for employees in the United States, the Virgin Islands, Puerto Rico, Guam, American Samoa and Canada; employees elsewhere should call (404)233-4400 or logging onto the TSP web site at http://www.tsp.gov via their Account Access.

-- For general TSP questions, call the Air Force Personnel Center at (800) 616-3775 (press 1, press 1, press 1, and follow the prompts).

-- Additional information about TSP, both regular and catch-up, is available on the TSP Web site. The TSP booklet "Summary of the Thrift Savings Plan" is also a good source of information. It is located on the TSP Web site under uniformed services TSP Forms and Publications.

Civilian
-- Civilians may contribute any whole percentage of their basic pay or a whole dollar amount each pay period to a regular TSP account, subject to the $15,500 annual maximum for 2007. If a whole dollar amount is designated and the amount exceeds remaining salary after mandatory and other voluntary deductions that occur ahead of TSP contributions, no TSP contributions will be made. In addition, if covered by the Federal Employees' Retirement System, no agency matching contributions will be received. Should this happen, an employee will need to make a new election and elect either a lower dollar amount or a percentage. No TSP contributions will be withheld from pay until the new election is effective.

-- Air Force-serviced civilians may submit regular TSP enrollment elections or changes at any time. Contributions will automatically continue into 2007 for those already in TSP; so, it is not necessary to submit an election unless you wish to change the amount of your bi-weekly contributions. The contribution on pay date Jan. 12, 2007 will apply towards the 2007 annual maximum.

-- Regular TSP enrollments or changes, or catch-up contribution enrollments submitted between Dec. 10-23 will be effective Dec. 24 and reflect on pay date Jan. 12, 2007; elections submitted between Dec. 24 and Jan. 6 will be effective Jan. 7 and reflect on the Jan. 26 pay date.

-- When submitting a catch-up contribution election, employees need to designate a whole-dollar amount to contribute each payday rather than the annual maximum of $5,000. Do not designate an amount that exceeds net pay or payroll will not withhold any TSP contributions. To spread catch-up contributions evenly over the year, divide the total contribution (up to $5,000) by the number of pay dates remaining in the year. There are 26 pay dates in 2007 for employees who submit their catch-up contribution election between Dec. 10-23.

-- Air Force-serviced civilians will enroll or submit regular TSP contribution elections, as well as catch-up contribution elections if eligible, via the Employee Benefits Information System Web application or the Benefits and Entitlements Service Team phone system. EBIS is available on the AFPC Web site at https://www.afpc.randolph.af.mil/afpcsecure/default.asp or through the Air Force Portal at http://www.my.af.mil.

-- Employees may reach the BEST phone system by dialing toll-free (800) 616-3775. Overseas employees need to dial a toll-free AT&T direct access number for the country they are in, then (800) 616-3775. When the phone system answers, press "2" for Air Force-serviced civilians, then "2" again for BEST benefits and entitlements, and follow the prompts. AT&T direct access numbers can be found at http://www.business.att.com/bt/dial_guide.jsp.

-- Additional information about TSP, both regular and catch-up, is available on the TSP Web site at http://www.tsp.gov and the BEST homepage at http://ask.afpc.randolph.af.mil/best/default.asp?prods3=272&prods2=264&prods1=44 (under Thrift Savings Plan). The TSP booklet "Summary of the Thrift Savings Plan" is also a good source of information. It is located on the TSP Web site under civilian or uniformed services TSP Forms and Publications.

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