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 illustration by Staff Sgt. Siuta B. Ika

New inspection system taking form at Nellis

U.S. Air Force photo illustration by Staff Sgt. Siuta B. Ika With the new Air Force Inspection System taking form, Nellis Air Force Base, Nev., Airmen will no longer spend weeks and months preparing for a one-week inspection, b...
 
 
U.S. Air Force illustration by Staff Sgt. Jamal D. Sutter

15 seconds: A rude awakening

U.S. Air Force illustration by Staff Sgt. Jamal D. Sutter Airmen and their families hit the road every summer to travel and enjoy a little relaxation. When making travel arrangements that involve driving long distances, be sure...
 
 
U.S. Air Force photo by Staff Sgt. Siuta B. Ika

Nellis’ newest mayor discusses hopes, goals

U.S. Air Force photo by Staff Sgt. Siuta B. Ika Col. Richard Boutwell, 99th Air Base Wing commander, shares a story with a member of the 99th Contracting Squadron during his unit immersion at Nellis Air Force Base, Nev., Aug. 1...
 

 
U.S. Air Force photo by Senior Airman Jason Couillard

Community outreach hosts Honorary Commander induction ceremony

U.S. Air Force photo by Senior Airman Jason Couillard Col. Richard Boutwell, 99th Air Base Wing commander, speaks to attendees of the Honorary Commander Induction Ceremony at Nellis Air Force Base, Nev., Aug. 7, 2014. The goal ...
 
 

AF implements static EPR closeout dates, eliminates change of reporting

JOINT BASE SAN ANTONIO-RANDOLPH, Texas — The first in a series of changes to the enlisted evaluation and promotion systems announced July 31 will include implementation of static enlisted performance report closeout dates, or SCOD, for each grade and elimination of change of reporting official EPRs. Evaluation system changes are focused on purposefully evolving the enlisted...
 
 
U.S. Air Force photo by Senior Airman Timothy Young

Running toward better health, wellness

U.S. Air Force photo by Senior Airman Timothy Young Senior Airman Ahlavatuah Garrett-Johnson, 99th Security Forces Squadron installation entry controller journeyman, finishes her Air Force fitness assessment at Nellis Air Force...
 




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