TSP board explains rules for military personnel

Thrift Savings Plan accounts for military personnel will operate under different rules than federal civilians' accounts, the TSP board said on Tuesday. The board proposed rules for military participation in the TSP, which begins this winter. Military personnel will be able to sign up for the TSP beginning Oct. 9 and start contributing to their accounts in January. The TSP will be open to the 2.5 million members of the Army, Navy, Air Force, Marine Corps, Coast Guard, Public Health Service and National Oceanic and Atmospheric Administration commissioned corps, and members of the National Guard and Ready Reserves of those services. The 2001 Defense Authorization Act is responsible for the expansion of the TSP to the uniformed services, potentially doubling the size of the nation's largest employer-sponsored retirement savings program. Under the proposed rules, uniformed personnel could contribute to their TSP accounts from basic, incentive and special pay, including bonuses and money not subject to federal income taxation. Civilian employees can only contribute from basic pay subject to federal income taxation. The rules also explain that military personnel could contribute 7 percent of basic pay per pay period in 2002. The limit would increase to 8 percent in 2003, 9 percent in 2004 and 10 percent in 2005. After that, the only limit that would apply is the Internal Revenue Service limit on 401k-style contributions, which this year is $10,500. Military personnel would not automatically get matching contributions from their services. Civilian employees in the Federal Employees Retirement System do get matching contributions. However, the head of each uniformed service would be allowed to authorize matching contributions. "When the secretary of a military department authorizes matching contributions for a service member, the service member's regular contributions will be matched dollar-for-dollar on the first 3 percent of basic pay contributed to the TSP, and 50 cents on the dollar on the next 2 percent of basic pay contributed," the TSP board said. The board explained that civilian employees who also serve in uniform would be able to open two accounts, one civilian and one military. Contributions to both accounts together could not exceed the Internal Revenue code limit. The proposal also describes rules for withdrawals, death benefits, legal processes, loans and correction of errors involving military participants' accounts. The board published the proposed rules in the May 1 Federal Register. Look in the Federal Retirement Thrift Investment Board's section.