Bulletin 14-5
August 12, 2014

Phased Retirement and the TSP

Section 100121 of Public Law 112-141 added new provisions in 5 U.S.C. 8336a and 8412a that provide authority for a new phased retirement program. This bulletin provides information on the responsibilities and actions agencies must take regarding TSP eligibility and participation for their employees who transition to phased retirement status.

I. Eligibility

For TSP purposes, the employment status of a phased retiree does not differ from that of a regular part-time employee. Therefore, phased retirees who are covered by FERS and CSRS continue their eligibility to participate in the TSP. As such, phased retirees are eligible to contribute to the TSP and are subject to the normal restrictions regarding TSP loans, financial hardship withdrawals, and/or age-based in-service withdrawals.

Employees in phased retirement status are not eligible for post-employment withdrawals. Employees in phased retirement status will not be subject to required minimum distributions or the TSP withdrawal deadline.

II. Agency Responsibilities

  • Inform employees who are transitioning to phased retirement that their eligibility (and their latest TSP election on file, if any) will continue through their transition. These employees must also be provided information regarding the benefits of participating in the TSP, in addition to information on how to change or terminate their contributions to the TSP.
  • Continue to submit TSP contributions and loan payments without interruption.
  • Allow phased retirees to make changes to their contribution elections.
  • Report correct TSP status codes, status dates, employment codes, and employment dates for phased retirees. Generally, these data elements will NOT change unless participants make changes to their TSP contribution elections.

III. Determining Contribution Amounts for Participants in Phased Retirement

TSP contributions for phased retirees are based upon the basic pay received by the employee during each pay period. TSP contributions will not be based on the phased retirement annuity payable by OPM. For FERS employees, all sources of contributions (employee contributions, Agency Automatic (1%) Contributions, and Agency Matching Contributions) must be determined using the basic pay.

Deductions for TSP contributions fall into the category of “other voluntary deductions,” and agencies must follow the order of precedence for other mandatory deductions before taking TSP contributions. If an employee has elected a percentage of basic pay, and if that percentage turns out to be an amount greater than the available pay after other deductions, then the TSP employee contribution is the amount of pay available after other deductions.

If an employee has elected a TSP contribution based on whole dollar amount, and if the whole dollar amount elected is greater than the available pay after other mandatory deductions have been subtracted, no employee contribution will be made for the pay period. Consequently, if covered by FERS, the employee receives no agency matching contribution for the pay period. Refer to TSP Bulletin 05-17, Elimination of Percentage Restrictions on Employee Contributions to the Thrift Savings Plan for a more detailed explanation.

Jim Courtney
Director, Office of Communications
Office of Communications and Education