Pay and Benefits Watch: Military not in TSP yet

The fiscal 2000 Defense authorization act, which President Clinton signed into law on Oct. 5, contained a provision allowing military personnel to participate in the Thrift Savings Plan. But for various reasons, service members won't be able to build TSP nest eggs any time soon.

TSP accounts are major components of many civilian employees' retirement savings. Since the TSP, which mirrors 401(k) plans in the private sector, was created in 1986, the amount of money civilians have invested in it has mushroomed to more than $85 billion. About 2.5 million civilians have TSP accounts.

The pool of potential military participants, both active and reserve members, is 2.6 million. If and when the military joins the TSP, the number of accounts could double.

But military members shouldn't count their nest eggs before they hatch.

For starters, the Defense authorization bill doesn't allow military members to start up accounts until 2001. The Federal Retirement Thrift Investment Board, the independent agency that oversees the TSP, has to prepare for the potential influx of new participants.

Furthermore, the TSP board estimates it would need an appropriation of $10 million to offset the administrative costs of handling accounts for reservists. If Congress did not provide an outright appropriation, the board would have to tack on annual administrative charges of 8.4 percent to reservists' accounts and 1.5 percent to active service members' accounts. Military members may be discouraged from participating with administrative rates that high. Civilian employees only pay 0.06 percent in annual administrative fees.

Besides those concerns, another main obstacle is a requirement in the authorization bill that additional legislation affecting tax revenues be enacted before military participation in the TSP is allowed.

Contributions to the TSP are tax-deferred, so military members would pay about $480 million less in taxes from 2001 to 2009, the Defense Department estimates. Before military personnel can set up TSP accounts, Congress must find a way to offset the deferred tax revenues.

If that does happen, military personnel would be allowed to contribute up to 5 percent of their salaries to their TSP accounts, up to a $10,500 annual limit. The government would not match their contributions, as it does for civilian employees enrolled in the Federal Employees Retirement System.

For now, the provision of the 2000 Defense authorization bill allowing military participation in the TSP is only the first step toward a benefit that may or may not ever actually be offered.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.


When you download a report, your information may be shared with the underwriters of that document.