The Roth option for the Thrift Savings Plan, which will allow federal employees to contribute after-tax dollars toward their retirement-savings accounts, will launch May 7, the Federal Retirement Thrift Investment Board announced today.

The board, which first began planning the Roth TSP after it was authorized in June 2009, made the announcement at its quarterly meeting of TSP coordinators.

Greg Long, the TSP’s executive director, said the Roth option “offers an important new tool for federal civilian employees and uniformed service members in managing their retirement income by providing greater flexibility in the tax treatment of contributions now and in the future.”

The agency unveiled draft regulations for the new plan in February.

Under the new rules, employees will be able to invest in both the traditional TSP, the new Roth option or a combination of both. TSP participants will have the option of selecting where and how much to invest in either traditional contributions or Roth contributions.

Roth contributions will be subject to the same investment limits as traditional tax-deferred contributions. For 2012, that limit is $17,000.

Participants in the new plan are still eligible for matching contributions from their agencies. However the agency match will only funnel into the traditional TSP option.

The TSP board also began mailing information about the new plan to TSP participants a few months ago.

Agency payroll departments have also had to update their bookkeeping systems to handle the new plan.

Launch previously delayed

TSP officials had originally planned to launch the new option at the beginning of 2012, however the start date was delayed in part to give agency payroll departments more time to prepare.

The addition of the Roth option is one of the biggest changes to the TSP program in some years.

“It is a large project with multiple moving parts,” Long told Federal News Radio in September. Adding the Roth option affects the TSP’s record-keeping system, communications materials, accounting and IT, he added.

The TSP retirement-savings plan, which is similar to private-sector 401(k) plans, has about 4.5 million participants and carries some $308 billion in investments.

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