Air Force

March 22, 2013

Furlough to affect thrift savings plan contributions

Claudette Roulo
American Forces Press Service

(AFNS) — Federal civilian employees could see their Thrift Savings Plan contributions reduced if furloughs take effect.

The Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve.

“Employees who have selected their TSP contribution to be a percentage of their pay will see smaller contributions during the furlough period due to their reduced pay,” said Navy Cmdr. Leslie Hull-Ryde, a Defense Department spokeswoman.

For example, an employee who earns $1,000 of basic pay every two-week pay period and contributes 10 percent of it to the TSP would make a $100 TSP contribution during a normal pay period. However, if the employee is furloughed for two days per pay period, his or her basic pay would decrease to $800. As a result, the TSP contribution would be $80 per pay period.

Employees who contribute a set dollar amount won’t see that amount change with a reduction in pay, Hull-Ryde said. For this reason, now is a good time to review TSP contribution amounts to see if they are appropriate, TSP officials said.

Basic pay reductions also will affect the matching funds contributed by the Defense Department and other agencies. According to a TSP news release, any reduction in pay will proportionally decrease the matching funds contribution, regardless of whether employees contribute a percentage of their pay or a set dollar amount.

The furloughs may cause financial hardship for some employees, and in those cases they may consider making a hardship withdrawal from their TSP fund. Such withdrawals have several restrictions:

  • If you take a hardship withdrawal, you will not be able to make any TSP contributions for six months after having received your funds.
  • You may withdraw only your contributions and the earnings associated with them, and the total amount cannot exceed your financial hardship.
  • You must pay income tax on the taxable portion of any withdrawal, and you may also be subject to a 10 percent early withdrawal penalty tax.
  • If you are a Federal Employees Retirement System participant, you will not receive agency matching contributions.
  • A hardship withdrawal cannot be repaid, so your TSP account is permanently reduced by the amount of your withdrawal.

A better option may be taking a loan against your TSP, officials said. Loans can be repaid — plus interest — but the account continues to accrue earnings even as the loan is paid back.

TSP officials recommend that employees think carefully before decreasing or stopping their traditional TSP contributions. Those contributions are subtracted from pre-tax income, and terminating the contributions could increase income tax liability. Roth TSP contributions are subtracted from employees’ after-tax income, and changes will not affect tax liability.

“One of the great things about your TSP contributions, no matter how small, is that the earnings compound over time. If you stop your contributions, even for a short time, you’ll miss this opportunity altogether,” the news release said.

Federal Employees Retirement System participants would, in effect, be losing free money by stopping their contributions, because matching contributions also would stop, officials said.




All of this week's top headlines to your email every Friday.


 
 

 
U.S. Air Force photo by Staff Sgt. Siuta B. Ika

AFAF gives all Airmen a chance to pay it forward

U.S. Air Force photo by Staff Sgt. Siuta B. Ika Master Sgt. Dennis Hutchison, 57th Aircraft Maintenance Squadron Tomahawks Aircraft Maintenance Unit production superintendent, fills out a pledge form for the 2015 Air Force Assi...
 
 
U.S. Army photo

First AF female general paves way for military women

U.S. Army photo Maj. Gen. Jeanne Holm, pictured here as an Army company commander in 1948, was the first woman to attend the Air Command and Staff School at Maxwell Air Force Base, Ala., in 1949. Her awards include two Distingu...
 
 

Red Flag at 40: ISR, coalition integration at its best

JOINT BASE SAN ANTONIO – LACKLAND, Texas — This year marks the 40th anniversary of Red Flag — the United States Air Force’s premiere air-to-air combat training exercise. For the last four decades it’s evolved and today it continues to hone the skills of its participants to meet current and future real world adversarial challenges. That...
 

 

799th SFS K9 handlers demonstrate military working dog skills, training

U.S. Air Force photo by Tech. Sgt. Shad Eidson Senior Airman Dominick Young, 799th Security Forces Squadron military working dog handler, takes a bite from MWD Samuel, while his handler, Staff Sgt. Anique Brassard, 799th SFS, prepares to give the release command during a K9 demonstration March 2 inside the Indian Springs Elementary School’s gymnasium....
 
 
U.S. Air Force photo by Airman 1st Class Mikaley Towle

AMMO brings ‘boom’ to Red Flag

U.S. Air Force photo by Airman 1st Class Mikaley Towle Airman 1st Class Austin Woosley, left, 57th Maintenance Squadron Munitions Flight crew member, and Senior Airman Forrest Patten, Offutt Air Force Base, Neb., 55th Maintenan...
 
 

SecAF introduces diversity initiatives

WASHINGTON — Secretary of the Air Force Deborah Lee James kicked off Women’s History Month by speaking to attendees during the Center for a New American Security “Women and Leadership in National Security” conference in Washington, D.C., March 4, 2015.   “There’s simply no country in the world as widely diverse as the U.S.” James...
 




0 Comments


Be the first to comment!


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>


Directory powered by Business Directory Plugin