Time running short for enrollment in Thrift Savings Plan

From Chief of Naval Personnel public affairs

The end of the year brings the end of the latest Thrift Savings Plan open season, when civilians and Sailors may adjust their TSP contributions or open an account. It began Oct. 15 and runs until Dec. 31.

TSP is a voluntary savings and investment plan for both Sailors and civilians. This open season, civilians under the Federal Employees Retirement System can increase contributions up to 14 percent of their pay; those under the Civil Service Retirement System and those in the military can contribute up to 9 percent of basic pay.

“Financial planning is an important aspect of our Sailors’ and civilians’ future. TSP provides an excellent opportunity to pay yourself first while reducing your taxable income, ” said Chief of Naval Personnel Vice Adm. Gerry Hoewing. “If you haven’t signed up yet, please take a look at the program and consider doing so before this open season ends.”

A major advantage of TSP is that no taxes are paid on contributions or earnings until withdrawal from the TSP account.

Those who are age 50 or older, and are contributing the maximum amount of regular TSP contributions for which they are eligible, may elect to make additional“catch-up” contributions from their taxable basic pay up to $3, 000 for 2004 beyond the Internal Revenue Service limits. Form TSP-U-1-C is used to make this contribution.

Sailors contributing to TSP from their basic pay may also contribute up to 100 percent of incentive pay and special pay, including bonus pay, but total contributions from taxable pay for the year may not exceed the IRS limit of $13, 000 for 2004.

Contributions from pay earned in a combat zone are not included in this limit, but they count toward another IRS limit, which specifies that yearly TSP contributions cannot exceed the lesser of 100 percent of compensation or $40, 000. This dollar amount is indexed and may rise in 2004. If Sailors also contribute to a civilian TSP account, total contributions to both accounts cannot exceed that limit.

Allotments can be as little as 1 percent of basic pay up to 9 percent for Sailors and CSRS employees, and up to 14 percent for those under the FERS system.

There are five different investment funds within TSP. Each of the funds varies in its long-term returns. These are:

• Government Securities Investment (G) Fund – invested in short-term, risk-free U.S. Treasury securities that are specially issued to the TSP.

• Fixed Income Index Investment (F) Fund – invested in a bond index fund that tracks the Lehman Brothers U.S. Aggregate (LBA) bond index.

• Common Stock Index Investment (C) Fund – invested in a stock index fund that tracks the Standard & Poor’s (S&P) 500 stock index (which comprises large companies).

• Small Capitalization Stock Index Investment (S) Fund – invested in a stock index fund that tracks the Wilshire 4500 stock index (which comprises small and medium companies).

• International Stock Index Investment (I) Fund – invested in a stock index fund that tracks the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) stock index (which comprises stocks in 21 countries).

There is no guarantee that future rates of return will match historical rates, and there is risk of investment loss in the F, C, S and I Funds.

TSP account balances are transferable to an eligible retirement plan. This option makes TSP an attractive investment, no matter the length of service.

For the most recent TSP information, visit the TSP Web site at www.tsp.gov or call the ThriftLine at (504) 255-8777.