TSP Roth Conversion Option to Launch in January

Starting in late January 2026, the Thrift Savings Plan will introduce a Roth in-plan conversion feature, allowing participants and spousal beneficiaries to shift money from traditional, pre-tax TSP balances to Roth accounts without leaving the plan, according to a TSP bulletin.

Under the new feature, eligible participants with at least $500 in vested funds will be able to convert any portion of their traditional TSP balance into Roth savings through their online account portal. Spousal beneficiaries will also qualify. Participants can request up to 26 conversions per account each year, specified in specific dollar amounts or percentages.

Each conversion will count as taxable income for the year in which the conversion occurs, meaning participants will owe income taxes on the converted amount, according to their marginal rate. The Federal Retirement Thrift Investment Board, which administers the TSP, urged participants to consult a tax professional before proceeding, as Roth in-plan conversions are irrevocable once processed.

According to the FRTIB, payroll offices should see minimal administrative impact, since conversions will be treated like money-out transactions such as loans or withdrawals—but without funds leaving the plan. Converted funds will be reflected on participants’ 1099-R tax forms the following January and will not affect annual contribution limits or W-2s.

The new option stems from the agency’s ongoing modernization of the federal retirement platform and aligns with provisions under the SECURE 2.0 Act of 2022, which expanded Roth flexibility across retirement plans.

For many federal employees, the feature could offer a valuable tax-planning tool—particularly for those expecting higher tax rates in retirement or seeking to diversify income sources.