Thrift Savings Plan

[Guest Lucie]

I know that pre-tax contributions to the Thrift Savings Plan (TSP) are subject to the elective deferral limit ($10,500 for 2000). Does the 401(a)(17) compensation limit ($170,000 for 2000) apply to the TSP? The FERS employees are entitled to an automatic 1% employer contribution and I am wondering whether the comp limit applies. Further, can someone educate me as to whether these employees are entitled to social security. I thought social security only applied to the private sector but after reading something on TSP it sounds like FERS employees are entitled to social security and CSRS employees are not. (As you may have guessed from my questions, I normally do not deal with plans outside of qualified plans in the private sector arena.)

[Guest Harvey Carruth]

The following is a quote from the FERS TSP web page with URL below (click on the answer to Question 5, then on TSP at the very bottom of the answer, then on TSP Features, and finally on Thrift Savings Plan):

http://www.opm.gov/fers_election/html/faq.htm

"The Internal Revenue Code, in 26 U.S.C. § 7701( j), states that the TSP is to be treated as a trust qualified under 26 U.S.C. § 401(a) which is exempt from taxation under 26 U.S.C. § 501(a)."

For all intents and purposes, the TSP is a 401(k) plan with a complex employer matching scheme for FERS participants. Therefore, the 401(a)(17) compensation limit does apply.

You are correct that FERS participants are entitled to participate in Social Security. See the Overview section of the following URL:

http://www.opm.gov/fers_election/fersh/h_fers3.htm

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J. Harvey Carruth

Carruth Compliance Consulting, Inc.

(503) 636-7995