The Postal Service bases all contributions to the TSP on basic pay. Refer to 432.2.
Employees must contribute in whole percentages or whole dollar amounts.
FERS or CSRS employees may contribute a percentage of basic pay up to the Internal Revenue Service (IRS) annual maximum. The Postal Service withholds contributions each pay period.
The Postal Service automatically contributes an amount equal to 1 percent of the employee’s basic pay every pay period. This agency automatic contribution starts the first pay period in the first election period that the employee is eligible to contribute and occurs even if the employee chooses not to contribute. This automatic contribution does not affect the employee’s salary.
CSRS employees receive no agency automatic (1 percent) contribution.
The following provisions apply regarding employees’ automatic enrollment and participation in the TSP, and employee requests for refunds related to automatic enrollment:
- Changing or Terminating Contributions. To change or terminate contributions to the TSP, employees must submit their contribution elections through one of the following options:
- PostalEASE, accessible on Blue (https://blue.usps.gov) and LiteBlue (https://liteblue.gov).
- Calling the HRSSC at 877-477-3273, option 1 (TTY 866-260-7507).
- Requesting a Refund. Participants automatically enrolled in the TSP may request a refund of the contributions deducted from their basic pay (including associated earnings) associated with the first 90 days of automatic enrollment. To request a refund, participants must complete and submit TSP-25, Automatic Enrollment Refund Request, directly to the TSP. The TSP must receive it no later than 90 days after the TSP’s receipt of the first automatic enrollment contribution (the refund deadline date). The following also applies:
- The TSP treats refunds as taxable ordinary income earned and will withhold 10 percent of the refund for federal income taxes. However, refunds are not subject to the Internal Revenue Code 10 percent early withdrawal penalty tax.
- FERS TSP participants will forfeit the agency matching contributions (and associated earnings) when their refund request is processed. The agency automatic (1 percent) contributions remain in the participant’s TSP account.
- Participants rehired and again automatically enrolled in the TSP upon reappointment may not be eligible for another opportunity to request a refund of automatic enrollment contributions from the period of reemployment. A new 90-day refund period is not allowed unless one full calendar year (January through December) has passed since the participant’s last automatic enrollment contribution.
The Postal Service matches employee contributions dollar for dollar through the first 3 percent of basic pay the employee contributes. The next 2 percent of basic pay the employee contributes is matched at the rate of 50 cents for every U.S. dollar. (See chart below.)
CSRS employees receive no agency automatic or matching contributions.
Employees are vested immediately in their own contributions and all earnings attributable to these contributions.
The following provisions apply:
- Employees are vested immediately in the following:
- Their own contributions.
- The agency matching contributions.
- The earnings attributable to these contributions.
- Employees are vested in the agency automatic contribution and earnings associated with those contributions after attaining 3 years of creditable civilian service as determined by their TSP service computation date. The following also applies:
- The Postal Service considers employees who die in service as vested in the agency automatic contributions.
- Employees on the rolls between January 1, 1984, and December 31, 1986, who the Postal Service automatically converted to FERS on January 1, 1987, received a 1 percent retroactive contribution for that time frame and were vested immediately in the retroactive contribution.
Each year the IRS sets the maximum contribution amount, which may vary annually. The TSP announces the limits on the ThriftLine, at www.tsp.gov, and in various publications.
Employees electing to make traditional contributions defer paying taxes on their contributions and the earnings until they withdraw them. Contributions of employees who are members of the U.S. uniformed services and who are making tax-exempt contributions will be tax-free at withdrawal, but their earnings will be subject to tax.
Employees make all traditional TSP contributions on a before-tax basis. The money contributed to the plan is not included when federal income taxes are calculated. TSP contributions are subject to Medicare and Social Security taxes.
The majority of states that tax income also consider contributions to the TSP on a before-tax basis. The law of the state in which the employee resides determines whether TSP contributions are tax deferred.
Taxes on the contributions of employees electing to make Roth contributions are withheld from these employees’ taxable wages as they make their contributions. Their earnings are then tax-free at withdrawal as long as they meet certain IRS requirements. By contributing after paying taxes on the earnings, employees gain the tax benefit when they begin their post-employment distribution.
The following chart provides basic information on the differences in taxation between traditional and Roth TSP contributions. Employees must contact their accountant, tax preparer, or other certified financial professional to determine which option may be the best for them.
The Treatment of …
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Traditional TSP
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Roth TSP
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Contributions
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Pre-Tax
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After-Tax
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Employee Paycheck
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Taxes are deferred, so less money is taken out of the employee’s paycheck.
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Taxes are paid up front, so more money comes out of the employee’s paycheck.
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Transfers In
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Transfers allowed from eligible employer plans and traditional retirement accounts (IRA).
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Transfers allowed from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s.
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Transfers Out
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Transfers allowed to eligible employer plans, traditional IRAs, and Roth IRAs.
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Transfers allowed to Roth 401(k)s, Roth 403(b)s, Roth 457(b)s, and Roth IRAs.
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Withdrawals
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Taxable when withdrawn.
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Tax-free earnings if 5 years have passed since January 1 of the year the employee made his or her first Roth contribution, and he or she is age 59 1/2 or older, permanently disabled, or deceased.
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TSP keeps participants’ traditional balance and Roth balance in separate “buckets” in participants’ TSP account to track contributions and transfers into the account. However, all transactions include a proportional amount from each balance. Participants are not permitted to select one or the other balance when requesting transactions, such as contribution allocation changes, interfund transfers, loans, and withdrawals.
Employees on leave without pay (LWOP) for an entire pay period are not allowed to contribute to the TSP and do not receive agency contributions to the TSP, including the agency automatic (1 percent) contribution, while they are on LWOP.
Exception: Employees on approved LWOP to serve as a full-time officer or employee of an organization composed primarily of employees may contribute to the TSP while they are on LWOP. The allowable contributions are based on the basic pay with the Postal Service and must be withheld from pay. For FERS employees, the paying organization decides whether to make the agency automatic contributions, matching contributions, or both.
Employees’ TSP contribution is determined individually each pay period based upon the basic pay the employee earned that pay period. TSP employee contributions may be taken as a partial deduction. When there is not enough available net pay to take the entire deduction, the TSP deduction will be taken based on the priority of deduction schedule the Postal Service established.
