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Thrift Savings Plan changes, 2021 IRS Annual Deferral Limit

By MyCG Staff

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The Thrift Savings Plan (TSP) is changing the way catch-up contributions are elected and withheld starting  start in January, 2021.

If you are turning 50 or older, you will no longer need to make separate catch-up elections to your TSP account each year.

Employee contributions to the TSP are considered to be elective deferrals. The IRS elective deferral limit for 2021 is $19,500.

Employees who will be 50 years old or older during 2021 may also contribute up to $6,500 in additional (catch-up) contributions if their regular contributions for the year reach the 19,500 limit.

Employees eligible for catch-up contributions can set one contribution rate, and when they hit the annual limit, the TSP will automatically start funneling the rest of their contributions for the year into catch-up contributions.

Your election will carry over each year unless you submit a new one. If you are eligible for agency matching funds, contributions spilling over toward the catch-up limit will qualify for matching contributions up to 5% of your salary.

Employees may start, stop, or change catch-up contributions at any time using MyEPP. If you choose not to contribute toward the catch-up limit, you should adjust your TSP contributions accordingly.

There will be 26 paychecks reported on the 2021 Wage and Tax Statement (W-2). TSP contributions for pay period 25, 2020 will count toward the 2020 IRS elective deferral limit. TSP contributions for pay period 26, 2020 and pay periods 1 through 25 of 2021 will be reported on the 2021 W-2.

Employees wishing to reach the maximum regular contribution limit for 2021, in equal installments, should elect to contribute $750 per pay period starting in pay period 26, 2020. Employees wishing to contribute the maximum including catch-up contributions for 2021, in equal installments, should elect to contribute $1,000 per pay period starting in pay period 26, 2020.

For more information on TSP contribution limits for 2021, refer to the TSP website

For more information on the new TSP catch-up procedures, please visit this website

If you have questions, please contact your servicing benefits specialist: