This summer, the Thrift Savings Plan, the government's 401(k)-style retirement savings plan, will begin allowing government workers age 50 and older to make "catch-up" contributions, as authorized by a law passed last year.
The contributions will be on top of regular contributions made by employees. This year, those covered by the Federal Employees Retirement System may invest as much as 13 percent of salary, and those under the Civil Service Retirement System may invest as much as 8 percent, up to a tax code cap of $12,000.
Here are answers to some questions that Diary readers have been asking:
Q: Who will be eligible for catch-up contributions?
A: To qualify, you must be:
* in a pay status (not on unpaid leave, retired or otherwise separated);
* contributing either your allowable maximum percentage or an amount that will result in your reaching the tax code dollar limit by the end of the year;
* at least 50 years old in the year the catch-up contributions are made;
* not in the waiting period on new contributions required after taking an in-service financial hardship withdrawal.
I don't have to actually reach age 50 before I make catch-up contributions?
You only have to be age 50 or older in the year you make them, even if your birthday is Dec. 31, as long as you meet the other conditions.
I will be eligible. How much can I make in a catch-up contribution?
Up to $2,000 this year, $3,000 in 2004, $4,000 in 2005 and $5,000 in 2006. After 2006, the amount will be adjusted for inflation.
When and how can I start making catch-up contributions?
The election period will begin in July, although the exact date hasn't been set. The election can be made effective no earlier than the first full pay period in August.
After the startup, eligible individuals can elect to begin catch-up contributions at any time; the feature is not linked to the TSP's open seasons. You can make more than one catch-up election in a single year, as long as you don't exceed the year's allowable dollar amount.
The TSP will issue a new form for this purpose, to be called the TSP-1-C. The TSP will not make a mass distribution of the form. However, agencies will be able to order it from the TSP, and it will be available on the TSP's Web site: www.tsp.gov.
Will it be like regular TSP investing, where I can choose either a dollar amount or a percentage of salary amount?
No. Catch-up contributions will be allowed in dollar amounts only. You will be able to elect any whole dollar amount up to the yearly limit. Deductions from pay will continue until you hit the annual catch-up limit, the calendar year ends, or you elect to stop the contribution.
What else could cause my contributions to stop?
Catch-up contributions will stop if you stop your regular contributions, take a financial hardship in-service withdrawal or go into non-pay status.
Could I stop and restart catch-up contributions?
Yes. Unlike regular TSP investing, in which there is a waiting period before resuming contributions after you stop them, catch-up contributions can be restarted at any time. Stopping catch-up contributions will not affect your regular contributions.
How will my catch-up contribution be invested?
The same way as your regular contributions, allocated among up to five available TSP investment funds, according to your choice.
Are catch-up contributions matched by my agency?
No. There is no government contribution toward catch-ups.
Can I contribute a lump sum for my catch-up contribution?
No. Catch-up contributions, like regular TSP contributions, must be made from payroll withholding.
Are catch-up contributions pretax or after-tax?
Pretax for federal and, in almost all cases, state income tax purposes.
Will my contribution election carry over into subsequent years?
No. You will have to fill out a new election form each year. Also, catch-up contributions elected for one year cannot continue into the following year.
Stephen Barr's e-mail address is firstname.lastname@example.org.