The Thrift Savings Plan (TSP) contributions limits for 2020 have been announced, and the adjustments, based on cost-of-living index numbers with increases permitted based on IRS regulations. TSP limits take effect on the first calendar day of the new year.
2020 Thrift Savings Plan Contribution Limits
|Elective Deferral Limit||$19,500||$19,000||IRC §402(g)||Applies to combined total of traditional and Roth contributions. For members of the uniformed services, it includes all traditional and Roth contributions from taxable basic pay, incentive pay, special pay, and bonus pay, but does not apply to traditional contributions made from tax-exempt pay earned in a combat zone.|
|Annual Addition Limit||$57,000||$56,000||IRC §415(c)||An additional limit imposed on the total amount of all contributions made on behalf of an employee in a calendar year. This limit is per employer and includes employee contributions (tax-deferred, after-tax, and tax-exempt), Agency/Service Automatic (1%) Contributions, and Matching Contributions. For 415(c) purposes, working for multiple Federal agencies or services in the same year is considered having one employer.|
|Catch-up Contribution Limit||$6,500||$6,000||IRC §414(v)||The maximum amount of catch-up contributions that can be contributed in a given year by participants age 50 and older. It is separate from the elective deferral and annual addition limit imposed on regular employee contributions.|
TSP is a retirement option for federal employees and military members, providing similar tax breaks and savings to those offered in the private sector under 401(k) programs. There is a “traditional” TSP and a “Roth” TSP option, and while some military members may choose simple, straightforward retirement plans, others may prefer more complex arrangements taking advantage of both traditional and Roth TSPs, and/or making additional investments.
Thrift Savings Plan Contribution Limits: Elective Deferral Limit
The 2020 Elective Deferral Limit is set at $19,500. That is a $500 increase from 2019. The $19,500 limit is applicable to the “combined total” of your contributions to Roth and Traditional TSP programs.
You read that correctly, military members cannot contribute $19,500 to each program, the limit indicates the total dollar amount you can contribute to one or both. This limit “includes all traditional and Roth contributions from taxable basic pay, incentive pay, special pay, and bonus pay” according to TSP.gov, but the 2020 limit is NOT applicable to “traditional contributions made from tax-exempt pay earned in a combat zone”.
Thrift Savings Plan Contribution Limits for: Annual Addition Limit
For 2020, the Annual Addition Limit is increased to $57,000 ($1,000 more than 2019) which indicates the total maximum dollar amount you may contribute in 2020 from all sources with the exception of the Catch-Up Contribution which is described below. The TSP official site describes the Annual Addition Limit as an extra limit “imposed on the total amount of all contributions made on behalf of an employee in a calendar year.”
The Annual Addition Limit is described as being per employer, and including employee contributions, matching contributions, “Agency Automatic” contributions, etc. As long as the employee is working for a federal agency, she or he is viewed as having “one employer” for the purposes of calculating this limit.
Thrift Savings Plan Contribution Limits: Catch-up Contribution Limit
The Catch-Up Contribution Limit for employees aged 50 or older is listed as $6,500 for 2020, which is $500 higher from the limits in 2019. This limit is imposed on catch-up contributions is separate from the Elective Deferral and Annual Addition limits.
What Military Members Need To Know About Roth TSP Contributions in 2020
Military members should remember that Roth TSP contributions are subject to the Elective Deferral Limit regardless of whether such contributions come from taxable or tax-exempt pay.
Those who wish to contribute tax-exempt pay toward the annual additions limit are required to choose the Traditional TSP option “to elect traditional contributions for any amount over the elective deferral limit”.
Those who may be eligible to make catch-up contributions and are drawing combat zone tax-free pay are not permitted to make traditional catch-up contributions from the tax-exempt pay. Catch-up contributions for Roth TSPs from tax exempt earnings are permitted.
Rules For Members Of The Ready Reserve Contributing To Military AND Civilian TSP
Members of the Ready Reserve who contribute to both military and civilian TSP accounts should know that those contributions are limited based on the total amount of their contributions made in 2019 to both types of TSP accounts.
Furthermore, those in the Reserve who are placed on active duty and elect to make tax-exempt combat zone pay contributions to their TSP are subject to the same annual addition limits. Just because one account is a civilian plan does not exempt the employee from the annual limits.
Who Is Eligible To Contribute To TSP?
Government employees (both military and civilian) are generally eligible to open and contribute to a Thrift Savings Plan. In general, applicants must be:
- A Federal Employees’ Retirement System employee hired on or after January 1, 1984.
- A Civil Service Retirement System employee hired before January 1, 1984 who did not choose to convert to the Federal Employees Retirement System also known as FERS.
- A member of the United States Military.
- A civilian listed as working in “certain other categories” of government service.
Only those listed as being in “pay status” as full or part time employees may contribute to TSP. Those who had a break in service with the federal government will either have their original TSP account contributions resumed once rehired, or the employee will be automatically enrolled in TSP once more.
Whether you resume or get a new account depends on whether 31 days have elapsed between the end of federal employment and the resumption of it. Those who were NOT enrolled in TSP before leaving government employment will not be automatically enrolled.
Thrift Savings Plan Contribution Limit History
|Year||Annual Contribution Limit||Max Catch-Up Contribution Limit||Annual Addition Limit||Annual Addition + Catch-Up|
|Blended Retirement System||Blended Retirement System FAQ|
|Blended Retirement System: Guard, Reserves||Which Retirement System Should I Choose?|
|Military Retirement Calculators||Thrift Savings Plan|