Proposed Amendment Would Eliminate Current TSP Catch Up Contributions

November 13, 2017

Because the Thrift Savings Plan is based on the same IRS rules governing contributions to 401(k) plans, the amendment would presumably impact federal employees who contribute to the TSP who also meet these criteria. In this case, Hatch’s proposed amendment would impact those who are 50 and older who make catch-up contributions.

 Under current law, individuals 50 and older are allowed to make an additional $6,000 contribution to a 401(k) or the TSP in addition to the annual $18,000 limit (this will be increased to $18,500 in 2018).

In lieu of the $6,000 pre-tax catch-up contribution, Hatch’s amendment proposes that individuals 50 and up could contribute $9,000, but it would be done with after-tax dollars, thereby requiring the funds to go into a Roth 401(k) or Roth TSP. Although the tax would be paid today, the advantage of the Roth account is that in the future, when the funds are withdrawn at retirement, no taxes would have to be paid at that time.

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