@Nords Can you go into more detail on how that matching works for people close to, if not already, maxed TSP contributions right before the end of the year? I was under the impression that the DoD 5% matching they do counts towards your annual contribution limit, so ideally you're supposed to contribute enough each month and add the match to your contribution total for the year to hit the max limit for the year. Or am I completely wrong? This was never clarified to me so I've been contributing less than the max to make sure I still get the match every month because I was told if I hit my contribution limit before the year-end, the matching stops until the year resets.
Yep, I can go into lots of detail and nope, the DoD 5% matching does not count against the elective deferral limit ($19K in 2019). That’s listed in the TSP contribution limits table. Which admittedly is a lot more complex than I’d thought possible, so you’re also right that it’s never been clarified.
https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/contributionLimits.htmlYou’ve been told incorrectly about the matching for the EDL. The matching does indeed stop if you personally contribute $19K to the TSP before December, but your $19K contribution limit does not include DoD's BRS agency/matching contributions.
The regular annual limit (elective deferral limit) says:
“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.”
The table doesn’t explicitly say this, but we’re supposed to infer by omission that agency automatic & matching contributions are not counted against the $19K limit. You can contribute $19K to the TSP from your own pay, and still get a few thousand more bucks in agency (1%) and matching (up to 5%) contributions.
In other words, you can contribute as much as $1583.33 to the TSP each and every month and still receive another 5% of your base pay every month in BRS agency/matching contributions. Of course in December you can go hog-wild and contribute $1583.37 to maximize your $19K.
You could even sort of front-load the TSP by contributing all but 5% of your base pay during January-November, and then contributing "just" 5% of your base pay in December. That earns you the full agency/matching contributions all year long.
The problem is that DFAS' MyPay (or Marine OnLine, or the USCG/NOAA/USPHS Direct Access) systems calculate your contribution in percentages, not dollars. (There's a proven psychological reason* for this, but it still makes the math painful.) You have to figure out the conversion between $1583.33 and your total pay amounts, and how you want to split it among the various pays, and how you want to split it between Roth TSP & Traditional TSP. (See the MyPay screenshot below.) Even then you still have to watch out for January pay increases, longevity increases every couple of years, the start/stopping of certain incentive & specialty pays like sea pay or sub pay, and the occasional bonus contract pay installment.
I’ve confirmed this with the DoD BRS office and the TSP. In Spencer’s case at MilitaryMoneyManual, that amounted to an additional $2687 of DoD’s “free” money. He ended up adding a grand total of $21,187 combined into his Roth TSP and traditional TSP accounts in 2018... in his case $18,500 in the former and the $2687 in the latter.
https://militarymoneymanual.com/brs-tsp-match-contribution-value/The higher limit for combat deployments (annual addition limit, $56K in 2019) says:
“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.”
This is how we’re supposed to know that the lower EDL does not include agency/matching contributions... because the higher AAL does include them.
Note that if you deploy to a combat zone and you’re eligible for the higher AAL, you still have this fine print in the TSP contributions table:
“If you are a member of the uniformed services, you should know that Roth contributions are subject to the elective deferral limit ($19,000 for 2019) even if they are contributed from tax-exempt pay. If you want to contribute tax-exempt pay toward the annual additions limit, you will have to elect traditional contributions for any amount over the elective deferral limit.”
What that footnote means in practice is that if you hit the EDL ($19K for 2019) in your Roth TSP anytime before December, then the TSP will shut down your contributions for the rest of the year-- even if you’re still deployed to that combat zone. I’ve also confirmed that several times with the DoD BRS office and the TSP:
https://the-military-guide.com/maximizing-your-thrift-savings-plan-contributions-in-a-combat-zone/[* Since the TSP's creation in 1986, the federal government has learned that some employees would set their TSP contributions at a certain dollar amount... and never change them. For 30 years. The $10 that they had deducted from their first paycheck in 1987 would still be a $10 deduction at their retirement ceremony in 2017. Because of this, a few years ago the Defense Finance and Accounting Service moved from dollar-amount contributions to percentages-of-pay contributions. This way the military's default contribution of 3% (upon joining the military) rises with every annual pay raise and promotion. Even if someone's contributing just 5% in order to get the full DoD BRS agency/matching contribution, it'll still go up with every pay raise and promotion. Of course some servicemembers try to push the annual contribution limits, so they have to watch their percentages. DFAS also sets the maximum contribution limits of 92% in order to have enough left from the remaining pay for FICA (7.45%), and 60%-65% in order to have enough left over for federal/state income-tax deductions.]
