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Roth TSP Matching

Does switching to a Roth TSP (Thrift Savings Plan) affect your employer’s matching contributions? The short answer is no.

Federal civilian employees receive matching contributions to their Roth TSP from their employers, and they are treated the same as they would be in a traditional TSP. But there are other implications for switching a traditional TSP to a Roth plan.

Contributing to a Traditional TSP

contribute to a traditional tsp

You can start, change, stop and resume TSP contributions at any time with no waiting period. Contributions to a TSP reduces your taxable income, meaning the more you contribute, the less tax you generally pay up front.

Earnings from both employee and employer contributions grow until distributions begin. You must begin taking distributions by April 1 of the year following the year you turn 70 ½.

At that time, withdrawals are taxed as income, much like the way a 401(k) works.

Matching Contributions in a Roth TSP

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The Thrift Savings Plan Enhancement Act of 2009 made Roth TSPs available so that federal employees could contribute after-tax dollars and collect tax-free distributions after they retire.

The Roth option did not change the nature of employers’ matching contributions: employers’ matching contributions to a Roth TSP are still deposited into a traditional TSP plan.

As a result, the earnings on these contributions are part of a traditional TSP plan and taxed as income upon withdrawal. 

It’s important to note that a Roth TSP is similar to a Roth 401(k), not a Roth IRA.

Synchrony Bank does not provide tax advice so be sure to contact your tax advisor or financial consultant before opening or contributing to a Roth TSP or to determine if you could benefit from splitting your contributions between a Traditional and Roth TSP.

Other Retirement Savings Tools

If you are looking for other ways to save for retirement, Synchrony Bank is here to help. We offer a wide range of savings products that can help grow your savings.

Call Synchrony Bank today at 1-844-345-5789. A banking representative will be happy to help you plan for your retirement.

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Sources:

IRS: https://jobs.irs.gov/resources/benefits/tsp


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