Does the Government Match TSP Contributions?

The Thrift Savings Plan (TSP) is a retirement savings and investment program for federal employees and members of the uniformed services. Similar to 401(k) plans, it helps participants save for retirement. The U.S. government provides contributions to employees’ TSP accounts, significantly boosting retirement savings.

Types of Government TSP Contributions

The U.S. government makes two distinct types of contributions to eligible employees’ Thrift Savings Plan accounts: Agency Automatic (1%) Contributions and Agency Matching Contributions. These contributions are a valuable component of the federal benefits package.

Agency Automatic (1%) Contributions are made by the government to most federal employees’ TSP accounts, regardless of whether the employee contributes their own funds. This contribution equals 1% of an employee’s basic pay for each pay period. These funds are deposited into the traditional TSP balance and do not reduce the employee’s take-home pay or taxable income.

The government provides Agency Matching Contributions, which are contingent upon an employee’s own contributions. The government matches 100% of the first 3% of basic pay an employee contributes to their TSP. For the next 2% of basic pay contributed, the government matches 50 cents on the dollar. If an employee contributes at least 5% of their basic pay, they can receive an additional 4% of their basic pay from the government in matching contributions.

Maximizing Your Government Matching Contributions

Employees should contribute at least 5% of their basic pay to their TSP account each pay period to receive the full government matching contribution. This contribution level unlocks the maximum 4% matching funds available from the government. Making this consistent contribution ensures that an employee takes full advantage of this employer-provided benefit.

Both Traditional (pre-tax) and Roth (after-tax) TSP contributions count towards the employee’s contribution for matching purposes. While employees can choose their tax treatment for their own contributions, the government’s matching contributions are always made on a pre-tax basis into the traditional TSP. This means even if an employee contributes solely to a Roth TSP, they will still receive the government match in their traditional TSP balance.

To ensure consistent matching contributions, spread your contributions evenly across all pay periods, especially if you plan to reach the annual Internal Revenue Service (IRS) contribution limit. Reaching the limit too early in the year can cause you to miss out on matching contributions for later pay periods. Basic pay for TSP purposes includes an employee’s fixed rate of pay, differentials, and premium pay, but excludes overtime or bonuses.

Important Rules and Limits for TSP Contributions

Understanding the rules and limitations governing TSP contributions is important for effective retirement planning. These regulations help define how much can be saved and when those savings become fully accessible.

Vesting requirements determine when an employee gains full ownership of contributions made to their TSP account. Employee contributions and Agency Matching Contributions are immediately vested, meaning the employee owns them right away. However, Agency Automatic (1%) Contributions have a vesting period, typically requiring two or three years of federal service, depending on the employee’s retirement system and position. If an employee separates from federal service before meeting the vesting requirement for the Automatic 1% contributions, those funds and their associated earnings may be forfeited.

The IRS sets annual contribution limits for employee contributions to the TSP. For 2025, the elective deferral limit for regular employee contributions (Traditional and Roth TSP combined) is $23,500. Employees aged 50 and older can make additional “catch-up” contributions of $7,500 for 2025. A new higher catch-up limit of $11,250 applies to participants aged 60-63 in 2025.

Government contributions (Automatic 1% and matching) do not count against an employee’s personal IRS elective deferral limit. However, a separate overall statutory limit, the “annual additions limit,” includes all contributions from the employee and the agency, set at $70,000 for 2025.

Employees can adjust their contribution percentages or amounts at any time through their agency’s payroll system, such as MyPay or Employee Personal Page, or via the TSP website. Changes typically take effect at the start of the next pay period following the election. This flexibility allows employees to modify their savings strategy as their financial situation or retirement goals evolve.