How to Roll Over Your TSP to a 401(k) Plan

The Thrift Savings Plan (TSP) and 401(k) plans are significant components of retirement savings for individuals in the United States. A TSP is a retirement savings and investment program for federal employees and uniformed services, similar to private sector 401(k) plans. A 401(k) plan is an employer-sponsored retirement account where employees contribute a portion of their income, often with employer matching contributions. Moving funds between these vehicles, known as a rollover, is common for reasons like changing employment or consolidating accounts. This process allows individuals to maintain the tax-deferred or tax-free growth of their retirement savings.

Eligibility and Prerequisites for Rollover

A TSP to 401(k) rollover requires meeting specific conditions. Separation from federal service commonly enables a TSP rollover, making the full vested account balance eligible. In-service withdrawals may also be possible under specific conditions, such as reaching age 59½, if permitted by the TSP and the receiving 401(k) plan.

The receiving 401(k) plan must accept incoming rollovers from other qualified retirement plans. Not all employer-sponsored 401(k) plans are structured to receive external funds. Confirm with the administrator of the receiving 401(k) plan if they permit such rollovers and what their requirements are.

The type of funds being rolled over must align between the plans. Traditional TSP funds, consisting of pre-tax contributions and earnings, typically roll into a traditional 401(k). Roth TSP funds, made with after-tax contributions, should roll into a Roth 401(k) to maintain their tax-free status. This alignment preserves the tax advantages of the savings.

Gathering Necessary Information and Documents

A rollover requires specific information and documentation from both your TSP and the receiving 401(k) plan. From your TSP account, you will need your account number, precise balance, and the breakdown of funds between traditional (pre-tax) and Roth (after-tax) contributions. This information is typically accessible through your TSP online account, annual statements, or by contacting TSP directly.

For the receiving 401(k) plan, you will need the full plan name, administrator contact information, and precise routing instructions for incoming rollovers. This often includes the plan’s Employer Identification Number (EIN) and specific transfer details. Inquire about any specific forms the 401(k) plan administrator requires for accepting rollover funds. Obtain these details by contacting your employer’s human resources or benefits department, or the 401(k) plan’s service provider.

Complete the appropriate TSP withdrawal forms once this information is gathered. For a full withdrawal after separating from federal service, use Form TSP-70, “Request for Full Withdrawal.” If seeking a one-time partial withdrawal after separation, Form TSP-77, “Request for Partial Withdrawal When Separated,” is the relevant document. These forms require accurate input of details about your TSP account and the receiving 401(k) plan to facilitate direct transfer.

Initiating the Rollover Process

Once information and forms are prepared, initiate the transfer of funds. There are two primary methods for rolling over retirement funds: a direct rollover (trustee-to-trustee transfer) and an indirect rollover. A direct rollover moves funds directly from your TSP to your 401(k) plan without you taking possession. An indirect rollover means funds are first distributed to you, then you deposit them into the new 401(k) account within a specific timeframe. Financial professionals advise using the direct rollover method to avoid potential tax complications and mandatory withholdings.

To initiate a direct rollover, submit the completed TSP withdrawal request form, such as Form TSP-70, directly to the Thrift Savings Plan. This form includes instructions for the TSP to transfer funds to your designated 401(k) plan. While you might start online, some transfers may require printing and mailing or faxing the completed form. Ensure all sections related to the receiving plan’s details are filled accurately to prevent delays.

Coordinate with the administrator of your receiving 401(k) plan. Inform them a direct rollover from your TSP is incoming and provide any required forms or letters. This coordination ensures the 401(k) plan is ready to receive and allocate the funds. After submission, monitor the transfer status through both your TSP account and the 401(k) plan’s portal. The entire rollover process typically takes two to six weeks, depending on plan administrators’ efficiency.

Understanding Tax Treatment

Tax implications for a TSP to 401(k) rollover depend on the transfer method and account types. A direct rollover from a traditional TSP to a traditional 401(k) is generally tax-free. This means no immediate taxes are due, and funds continue to grow tax-deferred until retirement withdrawals. A direct rollover from a Roth TSP to a Roth 401(k) is also tax-free, preserving the tax-exempt status of qualified distributions.

An indirect rollover carries notable tax consequences if not managed precisely. If funds are distributed directly to you from your TSP, the IRS mandates a 20% withholding for federal income tax. To avoid the distribution being treated as taxable income, the full amount, including the 20% withheld, must be rolled over into the new 401(k) within 60 days of receiving the funds. Failure to deposit the entire amount within this window can result in the untransferred portion being considered a taxable distribution, potentially subject to income tax and an additional 10% early withdrawal penalty if under age 59½.

For tax reporting, you will typically receive Form 1099-R, “Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.,” from the TSP. This form reports the gross distribution amount. For a direct rollover, the taxable amount on Form 1099-R will often be zero. If an indirect rollover occurs, the form shows the gross distribution and federal income tax withheld. The receiving 401(k) plan provider may also issue Form 5498, “IRA Contribution Information,” confirming the rollover contribution receipt. Maintain accurate records of these forms and transaction confirmations for tax compliance.