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for Agency and Service TSP Representatives

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Spillover Method for Catch-Up Contributions to the Thrift Savings Plan

Beginning January 1, 2021, the Federal Retirement Thrift Investment Board (FRTIB) will implement a new method for catch-up contributions called the “spillover” method. (Participants will continue using the TSP’s current catch-up program through the end of 2020.) Spillover will apply to all active civilian and uniformed services members turning age 50 or older. It will help simplify our catch-up program for both participants and agencies/services.

This bulletin provides agencies/services with detailed technical information about spillover and how the method will be applied to contributions toward the IRC 414(v) catch-up limit. Agency/service representatives should also read TSP Bulletin 19-5, Introduction of the Spillover Method for Catch-Up Contributions to the Thrift Savings Plan, dated July 23, 2019, for additional information. As additional information becomes available, we will post updates to Bulletin 20-1.

How Spillover Works

Under the prior catch-up program, TSP participants had to make a separate affirmative catch-up election every year by submitting Form TSP-1-C, Catch-Up Contribution Election (Form TSP-U-1-C for uniformed services members) or electing to make catch-up contributions through their electronic payroll systems. Payroll offices then submitted catch-up contributions to the TSP on special payroll records indicating that the contributions were catch-up contributions.

Participants were required to certify that they planned on meeting the IRC 402(g) elective deferral limit in order to make catch-up contributions, but this requirement was not always clear to participants or agencies/services. When participants made catch-up contributions without meeting the elective deferral limit, they could miss out on matching contributions.

Therefore, starting January 1, 2021, the TSP will no longer use Form TSP-1-C, TSP-U-1-C, or the special payroll records that designate contributions as catch-up. Participants will no longer make separate catch-up elections in their electronic payroll systems either. Employing agencies/services will submit catch-up contributions on the same payroll records used to submit the equivalent record for regular contributions. Those contributions will continue until catch-up eligible participants reach the combined elective deferral and catch-up limits for the year.

The TSP system will determine whether or not the participant is eligible to make additional contributions toward the catch-up limit based on the participant’s date of birth. A participant is eligible to make catch-up contributions in any year in which the participant is 50 or older, including the year in which the participant is age 49 but will turn age 50 by the end of the calendar year.

If the participant is eligible to make catch-up contributions, anything beyond the elective deferral limit will automatically start counting toward the catch-up contribution limit. These additional contributions will “spill over” until the participant meets the catch-up limit for those age 50 or older. Contributions spilling over toward the catch-up limit will be matched, but only up to the 5% of salary to which participants are already entitled. For additional details on matching, please see questions 8 and 9 in Bulletin 19-5.

Special note for uniformed services members making tax-exempt contributions in a combat zone: In rare cases where participants turning 50 or older reach the IRC 415(c) annual addition limit, their contributions can spill over toward the catch-up limit even if they have not met the elective deferral limit. However, once participants reach the annual addition limit, their catch-up contributions will not be matched, since the annual addition limit restricts the amount of matching that participants can receive for the year. For uniformed services participants in a combat zone, any spillover will be allocated to Roth, not traditional. (The TSP cannot accept tax-exempt traditional contributions toward the catch-up limit.)

Agency/Service Responsibilities

As a part of the spillover transition, electronic payroll systems (for example, myPay, EBIS, Employee Express) should make the following changes:

  1. Remove separate catch-up elections from TSP contribution pages,
  2. Include a brief explanation that participants 50 and older should add any contributions toward the catch-up limit in the same place they make their other TSP contributions, and
  3. Recycle any hard copies of obsolete TSP-1-C and TSP-1-U-C forms.

Accepting Amounts up to the IRS Limits

Important note: Amounts beyond the elective deferral and annual addition limits will automatically spill over toward the catch-up limit for those who are 50 and older, but the transition will also benefit those who are younger than 50 and help streamline agency/service submissions.

Before spillover, if a contribution would put a participant over the elective deferral limit, the TSP would return the entire contribution. After spillover, if a participant is not catch up-eligible, the TSP will partially accept the contribution up to the elective deferral limit and only return the amount exceeding the limit. Agencies/services would have a year to submit any negative adjustments on excess matching.

For example, Jane is 40 years old and $200 away from the elective deferral limit. If she tried to contribute $250 today, the TSP would return the entire amount. Post-spillover, the TSP will accept $200 and only return $50. Jane’s agency would then need to submit a negative adjustment for any excess matching within a year.

Back Pay Awards and Other Retroactive Pay Adjustments

Any corrective contributions or make-up contributions attributable to prior years must not exceed the elective deferral, catch-up, or (if including tax-exempt) annual addition limits applicable to those years. If the participant was age 50 or older during the year(s) to which the back pay award or other retroactive pay adjustment is attributable, then corrective contributions or make-up contributions will spill over toward the catch-up limit for those years. Corrective contributions and make-up contributions will spillover even if the contributions are attributable to years before 2021. However, catch-up contributions attributable to years before 2021 are not eligible for matching. To submit these corrections, agencies should use the regular records—even for amounts beyond the elective deferral limit.

Redesignations

If agencies would like to redesignate contributions toward the catch-up limit as Roth or traditional, they should use the regular redesignation records. For example, record 93, Redesignation Record Traditional Catch-up to Roth Catch-up, will be replaced by record 91. However, this record should not be used for tax-exempt catch-up contributions, since the TSP cannot accept tax-exempt traditional contributions toward the catch-up limit.

Additional Questions:

  • What should eligible participants do if they do not wish to contribute toward the catch-up limit? After spillover, the TSP will no longer reject regular contributions beyond the elective deferral limit for those turning 50 or older. If participants do not wish to contribute past the elective deferral limit, they should adjust their contributions accordingly.
  • What should participants do if they want their contributions toward the catch-up limit to be Roth, traditional, or a mix of both? Eligible participants would only have one payroll election. Thus, whatever they elect for their contributions up to the elective deferral limit (traditional, Roth, or both) would spill over and start counting toward the catch-up limit. The one exception is tax-exempt contributions toward the catch-up limit. For uniformed services participants in a combat zone, any spillover will be allocated to Roth, not traditional. (The TSP cannot accept tax-exempt traditional contributions toward the catch-up limit.)
  • Which reports will be affected? While we will not have a complete list of affected reports until our technical testing is complete later this year, we have identified the following reports that will no longer use catch-up records as of now:
    • 1702: Payroll Office Recap of Journal Voucher Processing
    • 5170: Journal Voucher Summary Report
    • 35005: Redesignation Error Report
    • 35004: Payroll Office Recap of Redesignation

Which records should payroll offices use after spillover?

After spillover takes effect, all catch-up records will be obsolete and will no longer be accepted. The equivalent regular record type will be used for the spillover method as follows:

Obsolete

Under Spillover Method

25 Roth Negative Adjustment Catch-Up Civilian 22 Roth Negative Adjustment Civilian
29 Negative Adjustment Civilian Catch-Up 26 Negative Adjustment Civilian  
30 Negative Adjustment Catch-Up Military 27 Roth Negative Adjustment Military
82 Roth Current Catch-Up Civilian
12 Roth Current Payment Civilian
83 Roth Current Catch-Up Military
13 Roth Current Payment Military
84 Roth Late Catch-Up Civilian 42 Roth Late Payment Civilian
85 Roth Late Catch-Up Military 43 Roth Late Payment Military
86 Current Catch-Up Civilian 16 Current Payment Civilian
87 Current Catch-Up Military 17 Current Payment Tax-Deferred
88 Late Catch-Up Civilian 46 Record Late Payment Civilian
89 Late Catch-Up Military 47 Late Payment Tax-Exempt
92 Redesignation Roth Catch-Up to Traditional Catch-Up Civilian 90 Redesignation Roth to Traditional Civilian 
93 Redesignation Traditional Catch-Up to Roth Catch-Up Civilian  91 Redesignation Traditional to Roth Civilian  
98 Redesignation Roth Catch-Up to Traditional Catch-Up Military 94 Redesignation Roth to Traditional Military
99 Redesignation Traditional Catch-Up to Roth Catch-Up Military 95 Redesignation R=Traditional Catch-Up to Roth Military


RECORDS

06 = Employee Data Record (Civilian and Uniformed Services)


CIVILIAN

Detail Records

Traditional Records

  • 16 = Current Payment Record
  • 26 = Negative Adjustment Record
  • 46 = Late Payment Record
  • 71 = FERCCA Payment Record
  • 72 = Miscellaneous Earnings Record (DSUB Only)
  • L6 = Loan Payment Record

Roth Records

  • 12 = Roth Current Payment Record
  • 22 = Roth Negative Adjustment Record
  • 42 = Roth Late Payment Record
  • 73 = Roth Miscellaneous Earnings Record (DSUB Only)
  • 90 = Redesignation Record Roth to Traditional
  • 91 = Redesignation Record Traditional to Roth

Header and Trailer Record Types

  • Employee Data, Payment, and Negative Adjustment
  • Loan
  • Redesignation

Journal Vouchers

  • TSP-2 = Certification of Transfer of Funds and Journal Voucher
  • TSP-2-G = Certification of Transfer of Funds and Journal Voucher for Contribution Requiring G Fund Breakage
  • TSP-2-L = Certification of Transfer of Funds and Journal Voucher for Loan Payments
  • TSP-2-F = Certification of Transfer of Funds and Journal Voucher for Earnings Adjustments (DSUB Only)
  • TSP-2-D = Certification of Redesignation of Records and Journal Voucher


UNIFORMED SERVICES

Detail Records

Records

  • 17 = Current Payment Record (Tax-deferred)
  • 18 = Current Payment Record (Tax-exempt)
  • 27 = Negative Adjustment Record (Tax-deferred)
  • 28 = Negative Adjustment Record (Tax-exempt)
  • 47 = Late Payment Record (Tax-deferred)
  • 48 = Late Payment Record (Tax-exempt)
  • 67 = Recharacterization Record (Tax-exempt to Tax-deferred)
  • 68 = Recharacterization Record (Tax-deferred to Tax-exempt)

Roth Records

  • 13 = Roth Current Payment Record
  • 23 = Roth Negative Adjustment Record
  • 43 = Roth Late Payment Record
  • 73 = Roth Miscellaneous Earnings Record (DSUB Only)
  • 94 = Redesignation Record (Roth to Tax-deferred)
  • 95 = Redesignation Record (Tax-deferred to Roth)
  • 96 = Redesignation Record (Roth to Tax-exempt)
  • 97 = Redesignation Record (Tax-exempt to Roth)

Header and Trailer Record Types

  • Employee Data, Payment, and Negative Adjustment
  • Loan
  • Recharacterization
  • Redesignation

Journal Vouchers

  • TSP-U-2 = Certification of Transfer of Funds and Journal Voucher
  • TSP-U-2-G = Certification of Transfer of Funds and Journal Voucher for Contribution Requiring G Fund Breakage
  • TSP-U-2-L = Certification of Transfer of Funds and Journal Voucher for Loan Payments
  • TSP-U-2-F = Certification of Transfer of Funds and Journal Voucher for Earnings Adjustments (DSUB Only)
  • TSP-U-2-D = Certification of Redesignation of Records and Journal Voucher
  • TSP-U-2-R = Certification of Recharacterization of Records and Journal Voucher