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Furlough to affect thrift savings plan contributions
Furlough to affect thrift savings plan contributions
03-14-2013 12:57 AM Tags: News Thrift Savings furlough TSP Financial Hardship Furlough to affect thrift savings plan contributions by: Claudette Roulo American Forces Press Service published: March 14, 2013 Share This: Tweet Comments WASHINGTON (AFNS) -- Federal civilian employees could see their Thrift Savings Plan contributions reduced if furloughs take effect. The Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve. "Employees who have selected their TSP contribution to be a percentage of their pay will see smaller contributions during the furlough period due to their reduced pay," said Navy Cmdr. Leslie Hull-Ryde, a Defense Department spokeswoman. For example, an employee who earns $1,000 of basic pay every two-week pay period and contributes 10 percent of it to the TSP would make a $100 TSP contribution during a normal pay period. However, if the employee is furloughed for two days per pay period, his or her basic pay would decrease to $800. As a result, the TSP contribution would be $80 per pay period. Employees who contribute a set dollar amount won't see that amount change with a reduction in pay, Hull-Ryde said. For this reason, now is a good time to review TSP contribution amounts to see if they are appropriate, TSP officials said. Basic pay reductions also will affect the matching funds contributed by the Defense Department and other agencies. According to a TSP news release, any reduction in pay will proportionally decrease the matching funds contribution, regardless of whether employees contribute a percentage of their pay or a set dollar amount. The furloughs may cause financial hardship for some employees, and in those cases they may consider making a hardship withdrawal from their TSP fund. Such withdrawals have several restrictions:
TSP officials recommend that employees think carefully before decreasing or stopping their traditional TSP contributions. Those contributions are subtracted from pre-tax income, and terminating the contributions could increase income tax liability. Roth TSP contributions are subtracted from employees' after-tax income, and changes will not affect tax liability. "One of the great things about your TSP contributions, no matter how small, is that the earnings compound over time. If you stop your contributions, even for a short time, you'll miss this opportunity altogether," the news release said. Federal Employees Retirement System participants would, in effect, be losing free money by stopping their contributions, because matching contributions also would stop, officials said. Tags: Financial Hardship, furlough, RAF Alconbury, RAF Croughton, RAF Fairford, RAF Lakenheath, RAF Mildenhall, RAF Molesworth, Thrift Savings, TSP, News Related Content: Furlough to affect thrift savings plan contributions by: Claudette Roulo American Forces Press Service published: Share This: Tweet Comments WASHINGTON (AFNS) -- Federal civilian employees could see their Thrift Savings Plan contributions reduced if furloughs take effect. The Thrift Savings Plan is a retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve. "Employees who have selected their TSP contribution to be a percentage of their pay will see smaller contributions during the furlough period due to their reduced pay," said Navy Cmdr. Leslie Hull-Ryde, a Defense Department spokeswoman. For example, an employee who earns $1,000 of basic pay every two-week pay period and contributes 10 percent of it to the TSP would make a $100 TSP contribution during a normal pay period. However, if the employee is furloughed for two days per pay period, his or her basic pay would decrease to $800. As a result, the TSP contribution would be $80 per pay period. Employees who contribute a set dollar amount won't see that amount change with a reduction in pay, Hull-Ryde said. For this reason, now is a good time to review TSP contribution amounts to see if they are appropriate, TSP officials said. Basic pay reductions also will affect the matching funds contributed by the Defense Department and other agencies. According to a TSP news release, any reduction in pay will proportionally decrease the matching funds contribution, regardless of whether employees contribute a percentage of their pay or a set dollar amount. The furloughs may cause financial hardship for some employees, and in those cases they may consider making a hardship withdrawal from their TSP fund. Such withdrawals have several restrictions:
TSP officials recommend that employees think carefully before decreasing or stopping their traditional TSP contributions. Those contributions are subtracted from pre-tax income, and terminating the contributions could increase income tax liability. Roth TSP contributions are subtracted from employees' after-tax income, and changes will not affect tax liability. "One of the great things about your TSP contributions, no matter how small, is that the earnings compound over time. If you stop your contributions, even for a short time, you'll miss this opportunity altogether," the news release said. Federal Employees Retirement System participants would, in effect, be losing free money by stopping their contributions, because matching contributions also would stop, officials said. Tags: Financial Hardship, furlough, RAF Alconbury, RAF Croughton, RAF Fairford, RAF Lakenheath, RAF Mildenhall, RAF Molesworth, Thrift Savings, TSP, News Related Content: More... |
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