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Many employers, together with the federal authorities who provide outlined contribution retirement plans corresponding to 401(ok) and 403(b) plans and the Thrift Financial savings Plan (TSP) are scrambling to be prepared for the implementation of rule requiring extremely compensated workers to make retirement plan “catch-up” contributions to the Roth account. The brand new rule is among the provisions popping out of SECURE Act 2.0, which grew to become was handed in December 2022.
The next are seven questions and solutions related to the brand new Roth catch-up contribution guidelines.
SEE ALSO: Larger TSP Catch-Up Contribution Limits for Some Members
1. When is the Roth TSP catch-up contribution requirement efficient?
The obligatory Roth TSP catch-up contribution requirement is efficient January 1, 2026. The requirement was initially scheduled to be efficient January 1, 2024. Nevertheless, the IRS delayed implementation of the obligatory Roth TSP catch-up rule for 2 years after retirement plan recordkeepers complained that they didn’t have sufficient time to adjust to the brand new guidelines. On September 15, 2025, the IRS issued last obligatory catch-up contribution rules.
2. Which federal workers are affected by the obligatory Roth TSP catch-up contribution rule beginning January 1, 2025?
These federal workers who will probably be 50 and older as of December 31, 2026 and whose 2025 Social Safety wages (Field 3 of their 2025 W-2 assertion) exceeded $150,000 are affected by the obligatory Roth TSP catch-up contribution rule beginning January 1, 2026.
3. Which workers usually are not affected by the obligatory Roth TSP catch-up contribution rule beginning January 1, 2026?
These federal workers who will probably be age 50 and over as of December 31, 2026, and whose 2025 Social Safety wages have been lower than $150,000 (Field 3 of the 2025 W-2 assertion) and people federal workers, age 50 and older throughout 2026 and employed someday throughout 2026 usually are not affected by the obligatory Roth TSP catch-up contribution rule for 2026. The next two examples illustrate:
Instance 1. Barbara, age 53, is a federal worker throughout 2025. Her anticipated taxable wages for 2025 (Field 1 of her W-2 assertion) will probably be $133,800. Her anticipated Social Safety wages for 2025 (Field 3 of her W-2 assertion) are anticipated to be $142,700. Barbara isn’t topic to the obligatory Roth TSP catch-up contribution rule for 2026.
Instance 2. Brandon, age 57, retired from non-public trade on December 31, 2025. He’ll begin working for the federal authorities on January 12, 2026. Brandon’s 2025 Social Safety wages (working for a personal firm) are $176,100 (most attainable). Throughout 2026, Brandon won’t be topic to the obligatory Roth TSP catch-up contribution rule. It’s because Brnadon was not a federal worker throughout 2025.
4. Which TSP catch-up contributions are affected by the brand new rule?
The obligatory Roth TSP catch-up contribution applies to workers aged 50 to 59 throughout 2026, and workers older than age 63 throughout 2026 (most “catch-up” contribution as much as $8,000), and the “tremendous catch-up contribution” as much as $11,250 for workers who’re age 60, 61, 62 and 63 throughout 2026. .
5. How does the brand new obligatory Roth TSP catch-up contribution rule apply to new federal workers?
New federal workers usually are not affected by the obligatory Roth TSP catch up contribution rule throughout their first 12 months of federal employment – irrespective of the quantity of their 2025 Social Safety wages. That’s, as a result of they’re first-year federal workers and subsequently shouldn’t have any prior 12 months (2025) wages from the federal authorities. As well as, these similar newly employed workers throughout 2026 is probably not affected by the obligatory Roth TSP catch-up contribution rule throughout their second 12 months of employment (2027). It’s because the prior 12 months (2026) greenback threshold isn’t pro-rated. The next instance illustrates:
Instance 3. Charlotte, age 52, is employed into federal service on July 1,2026 with an annual wage of $200,000. She won’t be topic to the Roth TSP catch-up contribution mandate throughout 2026 as a result of she had no 2025 wages with the federal authorities. Assuming the 2026 Social Safety wages threshold for the Roth TSP catch-up contribution restrict will probably be $160,000, and Charlotte earns with the federal authorities $100,000 in the course of the interval July 1,2026 via December 31,2026, Charlotte may even be exempt in 2027 from the Roth TSP catch-up contribution requirement. It’s because the $160,000 2026 prior-year greenback threshold isn’t pro-rated.
6. What occurs when a CSRS worker is aged 50 or older (and isn’t topic to the Social Safety FICA tax), and subsequently has Social Safety wages in Field 3 of their W-2 assertion of $0?
These CSRS workers who’re over age 50 will probably be topic to the obligatory Roth TSP catch-up contributions throughout 2025 if their Medicare wages (Field 5 of their W-2 assertion) exceed the Social Safety threshold ($150,000 throughout 2025).
7. What’s the impression if a federal worker aged 50 or older and who elects to make solely Roth TSP contributions beginning in January 2026?
Roth TSP deferrals made by a federal worker aged 50 or older to the Roth TSP beginning instantly in early January 2026 may have these contributions rely in direction of the obligatory Roth TSP catch-up requirement. Due to this fact, if a federal worker aged 50 or older who’s a high-wage earner and whose Social Safety wages exceeded $150,000 throughout 2025, is already making common Roth TSP deferrals, then the worker’s company can’t require Roth TSP contributions made after the $8,000/$11,250 restrict has been reached.
Beginning with the primary pay date throughout 2026 after the worker contributed $8,000/$11,250 to the Roth TSP, the worker’s company should enable the excessive wage earner to decide on whether or not to proceed contribute to the Roth TSP or to the standard TSP to the standard (before-tax) TSP. Upon the reaching early within the 12 months the Roth catch-up contribution restrict of $8,000/$11,250, the worker would is “deemed” to have met the obligatory Roth TSP catch-up contribution requirement. Primarily, which means that the TSP can mandate solely Roth TSP contributions as much as the greenback quantity of the 2026 catch-up contributions ($8,000 or $11,250). The next instance illustrates:
Instance 4. Jerry, a federal worker aged 52, earned $176,100 in Social Safety wages (most attainable) throughout 2025. For 2026, Jerry plans to contribute the utmost attainable to the TSP $24,500 common elective deferrals plus $8,000 catch-up contributions) for a complete of $32,500. Jerry is conscious of the truth that as a result of his 2025 Social Safety wages exceeded $150,000 throughout 2025, his $8,000 catch-up contributions should go into the Roth TSP. However Jerry additionally desires to contribute the utmost attainable to the standard TSP throughout 2025 ($32,500 much less $8,000 or $24,500) so as to decrease his 2026 federal and state tax liabilities and any below withholding penalties. Jerry subsequently instructs his payroll processing workplace that beginning with the primary pay date in January 2026, $1,250 of his biweekly pay will probably be deducted and contributed to the TSP unfold over 26 pay dates. Of the $1,250, for the primary 10 pay dates $800 will probably be contributed to the Roth TSP and $450 will probably be contributed to the standard TSP. Beginning with the eleventh pay date throughout 2026, Jerry can request that each one $1,250 be contributed to the standard TSP. Observe that by contributing to the standard TSP, Jerry reduces his adjusted gross revenue (AGI) to the extent that he could also be eligible to make the utmost Roth IRA contribution for 2026 ($8,600). If Jerry is married, his partner may be eligible to contribute the utmost attainable to a Roth IRA for 2026 ($7,500 if below age 50, $8,600 if older than age 50 throughout 2026). In so doing, Jerry has diminished his 2026 federal and state tax liabilities and presumably add extra monies to his and his partner’s Roth accounts.
Briefly, the brand new Roth TSP catch-up contribution rules current quite a few challenges, together with cautious monitoring of wages and clear TSP participant communication. The TSP service workplace will hopefully coordinate with all personnel and human useful resource places of work so as to put together for compliance and to make sure the continued success of the TSP retirement program.
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