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 Senior Airman Joshua Kleinholz

31st TES F-35s take on Green Flag 15-08

U.S. Air Force photo by Senior Airman Joshua Kleinholz Tactical air control party members from the 7th Air Support Operations Squadron, Fort Bliss, Texas, monitor radios from a defensive fighting position while AH-64D Apache he...
 
 
U.S. Air Force photo by Susan Garcia

USAF Weapons School JTAC graduates to receive hallowed patches

U.S. Air Force photo by Susan Garcia Master Sgt. Jared Pietras, left, U.S. Air Force Weapons School Joint Terminal Attack Controller Advanced Instructor Course instructor, and Tech. Sgt. James Larsen, JTAC AIC student, pass tar...
 
 

Leaders: Good, bad, forgotten

JOINT BASE SAN ANTONIO-RANDOLPH, Texas — It’s been my Air Force experience there are three categories of leaders — the good, bad, and the forgotten.Everyone reading this probably thinks they’re in the first category, but we know that’s not the case. Airmen who work for you certainly wish that were true, but not every leader’s...
 

 

Are you ready to transition out of your uniform?

VANCE AIR FORCE BASE, Okla. — Leaving the military is not as simple as staying home the day after your service commitment is up. Almost 23 years ago, after a summer vacation that lasted less than 48 hours, I showed up in Colorado Springs, Colorado, with about 1,000 of my new closest friends. Fast forward...
 
 
561st-Patch

561st JTS enhances warfighter TTPs

NELLIS AIR FORCE BASE, Nev. — Nellis AFB is home to many groups and squadrons with important mission capabilities that make the U.S. Air Force the most flexible and capable force possible. The 561st Joint tactics Squadron is ...
 
 
U.S. Air Force photo by Airman 1st Class Jake Carter

Airman’s Attic provides free items, goods

U.S. Air Force photo by Airman 1st Class Jake Carter Patrons at the Airman’s Attic look through the store’s inventory on Nellis Air Force Base, Nev., June 18. The Airman’s Attic is a volunteer-based organization where Air...
 




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=""> <s> <strike> <strong>