Does the Military Match TSP & How to Get It

The Thrift Savings Plan (TSP) is a retirement savings and investment program available to federal employees and members of the uniformed services. Much like 401(k) plans offered by private companies, the TSP allows participants to save a portion of their income through payroll deductions for retirement. The military offers matching contributions to the TSP, providing a significant benefit to those eligible.

Understanding the TSP Match

The Thrift Savings Plan match, particularly for uniformed service members, operates under the Blended Retirement System (BRS). This system involves two distinct types of government contributions to a service member’s TSP account.

First, the service branch provides an automatic 1% contribution of a service member’s basic pay directly into their Traditional TSP account. This contribution begins after 60 days of entering service and is provided regardless of whether the service member contributes any of their own funds.

Second, the service branch offers matching contributions based on the service member’s own contributions. The military matches dollar-for-dollar on the first 3% of basic pay that a service member contributes. Following this, the military matches 50 cents on the dollar for the next 2% of basic pay contributed by the service member. This matching contribution caps at 4% of basic pay. Even if a service member contributes to a Roth TSP, the matching contributions are always deposited into the Traditional TSP account.

Eligibility for Matched Contributions

Eligibility for the military TSP match is directly linked to participation in the Blended Retirement System (BRS). Service members who entered service on or after January 1, 2018, are automatically enrolled in the BRS and are therefore eligible for the TSP match.

For service members who entered before January 1, 2018, eligibility for the match depended on their decision to opt into the BRS. There was a designated opt-in period during which eligible service members could choose to switch to the BRS. Service members under legacy retirement systems are generally not eligible for the TSP match unless they opted into the BRS during this specific window.

Maximizing Your Matched Contributions

To receive the maximum possible government matching contributions, a service member must contribute at least 5% of their basic pay to their Thrift Savings Plan. This contribution ensures they capture the full 4% matching funds available from the service branch, in addition to the automatic 1% government contribution.

For example, if a service member contributes 5% of their basic pay, they receive a 3% match on the first 3% contributed and a 1% match on the next 2% contributed, totaling a 4% match. Combined with the automatic 1% contribution, this results in a total of 10% of basic pay going into the TSP account (5% from the service member and 5% from the government).

Contributions are made through payroll deductions from basic pay, and it is important to spread contributions throughout the year to ensure consistent receipt of the monthly match. If a service member reaches the annual contribution limit too early in the year, they may miss out on matching contributions for later pay periods.

Vesting and Withdrawal of Matched Funds

Vesting in the Thrift Savings Plan determines ownership of the contributions made to an account. For the automatic 1% contributions made by the service branch, there is typically a 2-year vesting period. This means a service member must complete two years of service to fully own these contributions and their associated earnings. If a service member separates from service before meeting this vesting requirement, the automatic 1% contributions and their earnings are forfeited.

In contrast, the matching contributions made by the service branch are immediately vested. This means that service members have immediate ownership of these funds as soon as they are contributed to their TSP account.

When it comes to withdrawing funds, service members have several options upon separation from service or reaching retirement age. Withdrawals can include partial distributions, total distributions, installment payments, or annuity purchases. Funds from a Traditional TSP account are taxed as ordinary income upon withdrawal, while qualified withdrawals from a Roth TSP account are tax-free. Early withdrawals before age 59½ may be subject to a 10% IRS penalty, in addition to income taxes, unless an exception applies.