How Much Will the TSP Match and How Does It Work?

The Thrift Savings Plan (TSP) is a retirement savings and investment vehicle for federal government employees and members of the uniformed services. This defined contribution plan operates similarly to a 401(k) offered by many private sector employers. It allows participants to save for retirement through payroll deductions and offers various investment options.

Understanding the TSP Match

The TSP match is a key benefit for eligible participants, primarily those under the Federal Employees Retirement System (FERS). Agencies automatically contribute 1% of an employee’s basic pay to their TSP account, regardless of employee contributions. They also provide matching contributions. The government matches employee contributions dollar-for-dollar on the first 3% of basic pay contributed. For the next 2% of basic pay contributed, the agency matches at a rate of 50 cents on the dollar.

To illustrate, if an employee contributes 5% of their basic pay, the agency’s matching contribution would be a dollar-for-dollar match on the first 3% and a 50-cent-on-the-dollar match on the next 2%. Combined with the automatic 1% contribution, the employee receives a total agency contribution of 5% of basic pay (1% automatic + 4% matching), effectively doubling their 5% personal contribution. To receive this maximum agency contribution, an employee must contribute at least 5% of their own basic pay.

Eligibility and Contribution Requirements

Eligibility for the TSP match is for employees covered by the Federal Employees Retirement System (FERS). This includes most federal civilian employees hired on or after January 1, 1984, and members of the uniformed services under the Blended Retirement System (BRS). Employees under the Civil Service Retirement System (CSRS) are not eligible for agency matching contributions, though they can still contribute their own funds to the TSP.

Both traditional (pre-tax) and Roth (after-tax) TSP contributions made by the employee count towards receiving the agency match. This allows employees flexibility in how their personal contributions are taxed, either deferring taxes until retirement with traditional contributions or paying taxes upfront for tax-free withdrawals in retirement with Roth contributions. While employee contributions can be either traditional or Roth, the agency match is always made on a pre-tax basis and deposited into the traditional balance of the TSP account. This means agency contributions and their earnings will be subject to federal income tax upon withdrawal in retirement.

Vesting and Managing Matched Contributions

Vesting determines when an employee gains full ownership of contributions made to their TSP account by the agency. For FERS employees, the vesting period for the automatic 1% contributions is three years of federal civilian service. Members of the uniformed services under the Blended Retirement System (BRS) become vested in the automatic 1% contributions after two years of service. If an employee separates from federal service before meeting the vesting requirement, unvested agency automatic 1% contributions and any associated earnings are forfeited back to the TSP.

In contrast, employees are immediately vested in their own contributions and any agency matching contributions. This means these funds belong to the employee from the moment they are contributed and matched, regardless of their length of service. Once vested, all agency contributions (both automatic and matching) are treated similarly to employee contributions for investment and withdrawal purposes. These funds appear in the employee’s TSP account and can be invested across the available TSP funds.