TSP Releases Draft Rules for Roth Option

February 8, 2012 (PLANSPONSOR.com) – The Federal Retirement Thrift Investment Board published a draft of rules on the implementation of a Roth 401(k) option to the Thrift Savings Plan (TSP). 

According to Government Executive, the new option would allow federal employees to invest their income that has already been taxed into a Roth account, in addition to contributing to a traditional TSP account.

The new Roth TSP component will invest an employee’s after-tax earnings and cannot be taxed when it is withdrawn. Also, there will be no income limit on earnings from TSP’s Roth option, as there is on a traditional Roth IRA.

According to the draft rules, employees who choose the Roth option will still receive matching contributions from their agencies; those matching funds, however, will go toward their traditional TSP account balances, reports Government Executive.

Agencies will continue to automatically enroll new hires into the TSP, contributing 3% of their basic pay, unless employees opt out.

According to the Federal Register, public comments on the draft rules must be submitted by April 9.

Click here to view the Federal Register notice.