Since 1987 your Thrift Savings Plan (TSP) contributions have been made on a pre-tax basis (before your income is taxed) and you pay taxes when you make a withdrawal. TSP is implementing a Roth option that allows you to make employee TSP contributions on an after-tax basis (after your income is taxed) and the contributions and earnings will be tax free when you withdraw them. The Roth applies only to employee contributions; there is no Roth option for Agency Automatic (1%) and Agency Matching Contributions for Federal Employees Retirement System (FERS) employees. As with all tax matters, you should seek the advice of a qualified tax or financial advisor for information pertaining to your specific tax situation.
The TSP announced that their system will be able to accept Roth TSP contributionsÂ May 7; however, because implementation involves technical and programmatic modification of payroll systems, not all agencies will be ready to participate on that date. Defense finance officials said the Roth option will be available on a phased basis by military service from June to October. Officials said the schedule will allow service finance employees to complete and thoroughly test the complex changes needed to the various payroll systems. The specific implementation date will be determined at a later time.
While you cannot elect to make Roth TSP contributions at this time, you can become educated about this option. You can learn more about Roth TSP at:
Introducing Roth TSP Video at https://www.tsp.gov/whatsnew/roth/index.shtml.
A New TSP Element pamphlet at https://www.tsp.gov/PDF/formspubs/tsplf30.pdf.
Roth vs Traditional Contributions at https://www.tsp.gov/whatsnew/roth/compareRoth.shtml.
TSP Highlights: Jan-Feb 2012 – Is Roth for You? at https://www.tsp.gov/PDF/formspubs/high12a.pdf.
Additional information about Roth TSP will be distributed as it becomes available.