When did tsp start for military?

When Did TSP (Thrift Savings Plan) Start for Military?

The Thrift Savings Plan (TSP) has a rich history that dates back to the 1920s. Initially known as the Civil Service Retirement System (CSRS) Annuity Fund, it was created to help federal employees save for their retirement. Over the years, the plan has undergone numerous changes, and in this article, we will focus on when TSP started for military personnel.

Early Years

The Annuity Fund was first established in 1920 to provide a supplemental income for federal employees who joined the Civil Service Retirement System (CSRS). It was designed to help offset the cost of living in retirement and provide a supplementary income to CSRS pension payments. The fund grew steadily over the years and by the 1950s, it had approximately $1 billion in assets.

The Civil Service Reform Act of 1978

The Civil Service Reform Act of 1978 was a significant milestone in the history of TSP. The act created a new retirement system for federal employees, known as the Federal Employees Retirement System (FERS). FERS replaced the CSRS Annuity Fund and became the primary retirement plan for federal employees.

TSP’s Evolution

From its inception, TSP was designed to be an employer-sponsored retirement plan similar to those offered by the private sector. The original TSP plan was mandatory for federal employees, requiring a 5% employer contribution and a 2% employee contribution. As the plan grew, changes were made to improve employee participation and investment options. Some of the key events that shaped TSP into what it is today include:

• 1988: TSP becomes fully vested: Prior to 1988, federal employees were not fully vested in the TSP until after 5 years of service. The 1986 Federal Employees Retirement System Restoration Act eliminated this vesting schedule, allowing employees to have full ownership of their accounts from the start.
• 1997: Window to the TSP Fund: The 1996 Uniformed Services Former Members Health Benefits Fund Act amended the TSP to permit participation by uniformed service members, including military retirees.
• 2008: Military TSP becomes eligible for automatic enrollment: Section 1116 of the John Warner National Defense Authorization Act for Fiscal Year 2007 amended the National Defense Authorization Act for Fiscal Year 2006 to permit automatic enrollment for Military TSP participants.

TSP for Military Members

The Military TSP (MTSP) began allowing military members to participate in 1997, following the passage of the Uniformed Services Former Members Health Benefits Fund Act. This change enabled military members to contribute to their retirement accounts while serving in uniform.

Key Features and Benefits

Here are some key features and benefits that TSP offers to military members:

• Lower Contribution Limits: Military personnel can contribute up to 15.4% of their basic pay, significantly lower than the 21.5% limit for civilian federal employees.
• Automatic Enrollment: In 2008, TSP became eligible for automatic enrollment for Military TSP participants, making it easier for military members to take advantage of the plan’s benefits.
• Government Contributions: The government provides a 5% employer matching contribution, with no caps or limits on the benefit.
• Investment Options: TSP offers a range of investment options, including index funds, stock funds, bond funds, and a lifecycle fund, allowing military members to manage their investments according to their risk tolerance and retirement goals.
• Withdrawals and Loans: Military personnel can withdraw or borrow against their TSP accounts using loans or rollovers, providing greater flexibility in managing their financial situation.

Conclusion

The Thrift Savings Plan has a rich history, dating back to the early 20th century. When did TSP start for military? The short answer is 1997, when the Uniformed Services Former Members Health Benefits Fund Act amended the National Defense Authorization Act for Fiscal Year 2006. Today, TSP remains a valuable retirement savings opportunity for military members, with benefits such as automatic enrollment, government contributions, and a range of investment options.

Table: Contribution Limits for Military TSP Participants

Note: The contribution limits are calculated based on the military member’s basic pay and subject to change.