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  • Starting in January 2021, we’re making the process easier for participants. If you’re turning 50 or older and are eligible for catch-up, you’ll no longer need to make separate catch-up elections to your TSP account. To learn how to make these contributions next year, visit Catch-up contributions.

TSP bulletin
for Agency and Service TSP Representatives

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

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 or services.

Important: In order to ensure a smooth transition: agencies/services should send any payroll files intended for calendar year 2020 before December 31, 2020, to ensure posting toward 2020 limits.

This updated 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. The information contained in this bulletin (and Bulletin 19-5) supersedes any mention of the catch-up contributions process found in previous TSP bulletins.

Here’s the new information we’ve added in this update:

  • In Section I, we note that participants aged 50 or older who do not wish to contribute toward the catch-up limit should adjust their contributions accordingly.

  • In Section II, we remind agencies/services of critical changes that must be made to electronic payroll systems (for example, myPay, EBIS, Employee Express) by January 1, 2021. After the spillover transition, these systems should no longer offer separate catch-up elections. Electronic payroll systems should include a note that participants 50 and older should add any contributions toward the catch-up limit in the same place they make their other TSP contributions.

  • In Section IV, we note that any negative adjustment records will remove catch-up contributions first (if applicable) based on the origination date.

  • In Section VI, we have added questions to explain what happens when participants contribute to both a civilian and a uniformed services TSP account and when uniformed services members making traditional tax-exempt contributions reach the IRS annual addition limit.

  • In Section VII, we have updated the table of records payroll offices should use after the spillover transition.

I. 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 and 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 if 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 on 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. Participants aged 50 or older who do not wish to contribute toward the catch-up limit should adjust their contributions accordingly. All of the spillover changes are required regardless of whether an agency also offers a non-federal defined contribution plan.

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, participants should allocate any spillover beyond the annual addition limit to Roth, not traditional. (By regulation, the TSP cannot accept tax-exempt traditional contributions toward the catch-up limit; see third question in Section VI).

II. Agency/Service Responsibilities

As a part of the spillover transition, agencies should make the following modifications to their electronic payroll systems (e.g., myPay, EBIS, Employee Express). Important note: These changes are absolutely critical because we will not be able to accept separate catch-up records after January 1, 2021 (see Section VII). If payroll systems are not updated and agencies/services continue sending separate catch-up records after January 1, those contributions will be returned, and agencies/services will need to resubmit on the equivalent regular record.

  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 as their other TSP contributions, and
  3. Recycle any hard copies of obsolete TSP-1-C and TSP-1-U-C forms.

III. 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 reject the amount exceeding the limit. Agencies or 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 reject $50. Jane’s agency would then need to submit a negative adjustment for any excess matching within a year.

IV. 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. Any adjustment records will remove catch-up contributions first (if applicable) based on the origination date. 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.

V. 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.

VI. 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.
  • How does the TSP apply the limits if a participant contributes to both a civilian and a uniformed services TSP account? If a participant contributes to both a civilian and uniformed services account, the elective deferral limit applies to the total contributions the participant makes during the year to both accounts. It works the same way for contributions toward the catch-up limit.

    Note: Tax-exempt contributions made to the traditional balance of a uniformed services account while the participant is deployed to a designated combat zone do not count toward the elective deferral limit. However, any Roth TSP contributions a participant makes are subject to the limit even if they are contributed from tax-exempt pay. Also, if a participant enters a combat zone and receives tax-exempt pay, only Roth contributions toward the catch-up limit are allowed. The TSP cannot accept traditional tax-exempt contributions toward the catch-up limit.

  • If a uniformed services member is in a combat zone making traditional tax-exempt contributions and reaches the annual addition limit, will the TSP switch the contributions to Roth and let the participant spill over to catch-up? No. Only the participant can designate whether contributions are traditional or Roth. If a catch-up eligible member reaches the annual addition limit after making traditional tax-exempt contributions, he or she would then need to elect Roth to spill over toward catch-up. The TSP cannot accept traditional tax-exempt contributions toward the catch-up limit. (Note: We expect these instances to be rare).
  • 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, members should allocate any spillover beyond the annual addition limit 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

VII. 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 Negative Adjustment Record (Tax-Deferred) Military
33 Roth Catch-Up Contribution Negative Adjustment Record
23 Roth Negative Adjustment Record
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-Deferred)
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
  • 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 Earnings Adjustment

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) Military
  • 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)
  • 72 = Micellaneous Earnings Record

Roth Records

  • 13 = Roth Current Payment Record
  • 23 = Roth Negative Adjustment Record
  • 43 = Roth Late Payment Record
  • 73 = Roth Miscellaneous Earnings Record
  • 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 Earnings Adjustment

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

VIII. How are error codes changing after spillover?

Error code updates are displayed by category below and summarized in full here.

The following codes will be added on 1/1/2021

New Error Codes

Short Description
PL9 Employee contribution will cause the IRS elective deferral or catch-up limit to be exceeded.
RT5 Re-characterization will cause the participant to exceed the 415(c) annual addition limits.

The following Error Codes will be changing on 1/1/2021

Error Codes Changing

Short Description
PC3 Employee contribution will cause the IRS catch-up limit to be exceeded.
P9J Employee contribution will cause IRS elective deferral limit to be exceeded.
RN7 Invalid record number or record type. For catch-up records, please use equivalent regular record.

The following Error Codes will be obsoleted on 1/1/2021

Obsolete Error Codes

Short Description
RC1 RC2
RC2 DOB in system indicates participant is not eligible to make catch-up contributions.
RD4 Roth catch-up contribution for APD is less than amount to be redesignated as tax-deferred catch-up contribution.
RD5 Catch-up contribution for APD is less than amount to be redesignated as Roth catch-up contribution.
RZ4 Roth catch-up contributions in account are less than Roth catch-up contributions to be redesignated.
RZ5 Tax-deferred catch-up contributions in account are less than tax-deferred catch-up contributions to be redesignated.
WC3 Contribution posted caused participant to exceed catch-up limit. Submit 29-record to remove excess.

The following forms and publications will be changed to reflect the spillover method.

Participant Forms:

  • TSP-1, Election Form
  • TSP-U-1, Election Form (Uniformed Services)
  • TSP-1-C, Catch-Up Contribution Election (form to be removed by 1/1/2021)
  • TSP-U-1-C, Catch-Up Contribution Election (Uniformed Services) (form to be removed by 1/1/2021)
  • TSP-19, Transfer of Information Between Agencies
  • TSP-44, Request for Refund of Excess Employee Contributions

Fact Sheets:

  • TSP Benefits That Apply to Military Service Members Who Return to Civilian Federal Service (USERRA)
  • Annual Limit on Elective Deferrals
  • Contributions Toward the Catch-Up Limit Fact Sheet

Booklets:

  • Summary of the Thrift Savings Plan
  • Managing Your Account for Civilian Federal Employees
  • Managing Your Account for Members of the Uniformed Services

Leaflets:

  • How to Read Your Quarterly TSP Participant Statement (obsoleted)
  • How to Read Your Annual TSP Participant Statement (obsoleted)