TSP mulls investment conversion option

Thinkstock

The Thrift Savings Plan is weighing whether to let enrollees to convert their traditional investments to a Roth account, according to the board that oversees the retirement program.

The fiscal cliff law signed earlier this month allows the TSP and other plans to give enrollees the option to switch accounts. Participants would pay taxes on the amount converted to a Roth account. “We are currently waiting for tax reporting guidance from the [Internal Revenue Service] and will be studying the actions required to offer a conversion option,” according to a news update on TSP’s website. “After that review, we will make decisions on whether to proceed.”

The TSP Roth option, unveiled in May 2012, allows beneficiaries to invest money that already has been taxed and is not taxed again upon withdrawal, unlike traditional TSP investments. With Roth’s addition, participants now can invest pretax or after-tax dollars in any of TSP’s offerings as long as their total contributions are within the IRS limits. The IRS increased the cap on annual individual TSP contributions in 2013 from $17,000 to $17,500. Employees age 50 and older can contribute an additional $5,500 a year in catch-up contributions as long as their regular contributions for 2013 are expected to reach the $17,500 limit.

The pool of Roth participants is smaller than those with traditional investments, but it’s growing in popularity. As of December 2012, the TSP had nearly $100 million in Roth assets. The amount of money in the Roth pool doubled between September and the end of November, the board reported. “The pick up on Roth continues to be strong,” said Renee Wilder, director of the board’s Office of Enterprise Planning, during a December meeting. There are 73,041 enrollees with Roth balances, up from about 40,000 in August.

The TSP just launched an online calculator which allows enrollees to compare current and future Roth and traditional investments.

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

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

  • Sponsored by eSignLive by VASCO

    Mobile E-Signatures for Government

    Learn 5 key trends that accelerate government demand for mobile signing.

    Download
  • Sponsored by Management Concepts

    SPONSORED: Successful Change Management Practices in the Public Sector

    How governmental agencies implement organizational change management.

    Download
  • Sponsored by Kronos

    Solving the Workforce Compliance Challenge

    Download this eBook to learn how data and automation can help state and local agencies.

    Download

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