What is the Federal Thrift Savings Plan?

The Thrift Savings Plan (TSP) is a valuable benefit of federal service. The TSP is open to both Uniformed Military members and civilian employees of the federal government. The TSP similar to a 401k, and is a vehicle that allows employees to save money and invest in stocks and mutual funds to increase their return on their investment. The TSP is administered by the Federal Retirement Thrift Investment Board (FRTIB), which is managed by an Executive Director and five Presidentially-appointed board members. In addition, the assets of the TSP are held in trust in the Thrift Savings Fund. Regulations governing the TSP can be found in Title 5 of the Code of Federal Regulations, with amendments located in the Federal Register.

Uniformed Service Members

Members of all five branches of the active-duty military are eligible to invest in the TSP. In addition, all five Reserve branches of the military are eligible for the TSP. And even though Air National Guard and Army National Guard members are employees of their respective states for the majority of their service (some exceptions are during natural disasters and wartime deployments when they are under the control of the federal government), they are also eligible for the TSP at all times. The federal government does NOT match military members' contributions to the TSP. However, contributions made to the TSP by military members while on a qualified wartime deployment are not subject to any type of state or federal taxes, which is a valuable perk of military service.

Civilian Employees

Civilian employees of the federal government are also eligible to invest in the Thrift Savings Plan. Some civilian employees, those covered by the (FERS) are entitled to matching contributions from the federal government. Those federal civilian employees who fall under the Civil Service Retirement System (CSRS) retirement system are not eligible for matching contributions.

Contribution Limits

The TSP has established contribution limits for participants. These limits are dependent upon several factors. Participants can use the contributions calculator on the TSP website to determine what their maximum contribution limits are each year.

How It Works

Participants elect to contribute to the TSP in an amount of their choosing from each paycheck. The amount is automatically withdrawn by the participant's service and sent to TSP. Participants can select which of the TSPs funds they would like their contributions to be invested in. At the time of this writing, the TSP offered six funds to participants: the G, L, F, C, S and I funds. Participants can maintain their accounts entirely online on the TSPs website, or receive help from the finance office at their location of employment.

The TSP is a great way for federal employees and military members to plan and save for retirement. If you are a federal employee and haven't already begun contributing, it's never too late; talk to your finance office and begin making contributions as soon as the open enrollment period begins again!

More from this contributor:
Common Retirement Mistakes I've Seen as a Retirement Advisor
Tips For Paying Off Your Holiday Bills
How to Get Great Deals When Shopping Online During the Holidays