Tax proposal takes aim at catch-up TSP contributions

Senate Finance Committee Chairman Orrin Hatch (R-Utah) is planning to introduce a series of amendments to the tax reform legislation that would restrict federal employees from making extra contributions to their Thrift Savings Plan accounts from pretax earnings, Government Executive reports.

According to the article, the amendment is expected to increase the maximum catch-up contribution in a given year from $6,000 to $9,000, but would also require those contributions to be made to Roth plans only, meaning that the money would be taxed prior to investment, rather than when participants withdraw money after they retire.

Currently under law, in 2018, TSP participants would be able to contribute a maximum of $18,500 to their retirement accounts before investments are taxed, while employees 50 and older could contribute an additional $6,000 before their investments become taxable as income, the article notes.

2021 Digital Almanac

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