2/14/03: Catchup Contributions Coming This Summer

by Mike Causey

Beginning in July, Thrift Savings Plan investors who are age 50 or older can sign up to put an extra $2,000 in their accounts this year. The catchups are over and above any other contribution limits and also apply to military investors.

For higher paid individuals, that means they can contribute up to $14,000 tax-deferred this year.

Investors who sign up in July will see their payroll contributions begin in August. Those who want to make catchups next year when the amount rises to $3,000 will have to fill out new forms at the end of 2003.

Catchup contributions jump to $4,000 in 2005 and $5,000 in 2006. Each year thereafter they will be $5,000 adjusted for inflation.

Eligibility for catchups includes any fed or military investor 50 or older, or who turns 50 anytime this year, even if it’s December 31st. So, you can make the extra contributions in anticipation of your 50th birthday this year.

The $2,000 catchup is an add-on. It’s in addition to any other limits imposed by the TSP or the IRS for contributions to a 401k plan.

For example:

This year the maximum contribution for CSRS personnel and military investors is 8 percent. The max for FERS employees is 13 percent. The IRS elective deferral limit which is the amount any individual can put into a 401k plan, is $12,000 this year. But those folks allowed to make catchup contributions, who are otherwise contributing the maximum, can put in an extra $2,000. That will allow some people to make a total of $14,000 in tax-deferred contributions this year.

Case in point:

A handful of highly-paid FERS employees and a few CSRS workers who make over $150,000 per year, will bump up against the total $14,000 limit this year.

The catchup contributions authority has been in effect since last year. But it is up to individual 401k plan managers or sponsoring companies to implement them. Many private sector company’s still haven’t done that because of the extra paperwork involved.

Congress had to act before the government could allow the catchup contributions for the TSP. In the closing days of Congress, it did approve a bill first sponsored by Rep. Constance Morella (R-Md.) and pushed through the Senate by Sens. Daniel Akaka (D-Hawaii) and John Warner (R-Va.). The government said it would implement the catchups as soon as it had tested systems to allow for the additional withholding, and when hundreds of federal and military payroll offices said they were good to go.

For details about the program, click here and look at TSP Bulletin 03.4 under the “Info For Agency Reps” section.


The gang at the Large and Mid-Size Business Division of the IRS wants to wish Joyce Marie Atkins a very happy birthday today. Colleague Jeanne Kearney would not divulge Joyce’s age. So what is a Double Nickle?

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