OC 13-7 (5/2013)Previous Editions Obsolete
Sequestration and Your TSP Account
How will a urlough aect my TSP contributions?
As you know, your SP employee contributions arededucted rom your pay. I you are currently making contributions based on a percentage o your basic pay,here’s what happens: I you earn $1,000 o basic pay every two-week pay period and you contribute 10% o it to the SP, you’d have a $100 SP contribution every pay period. I you are urloughed or 2 days per pay period, then your basic pay would decrease to $800 andas a result, your SP contribution would decrease by an equal percentage so that your contribution would be$80 per pay period. Simply stated, your SP contribu-tion decreases in direct proportion to the reduction inyour basic pay. Tereore, you may nd that lowering your contribution percentage is not necessary.But i you are currently making SP contributionsbased on a dollar amount o your pay, that dollaramount will not automatically decrease with your re-duction in pay. You may want to revisit whether thatamount is still appropriate given the expected impact o your urlough.I you are a FERS
participant, also keep in mind thatany reduction in your basic pay will impact your agency contributions. Whether you are contributing a percent-age o your pay or a specic dollar amount, your Agency Automatic (1%) and Agency Matching Contributions will decrease proportionally. I you then choose to de-crease the amount o your SP contributions, be sure youunderstand how it will afect your agency contributions.For more inormation, visitypes o Contributions.
Should I terminate my TSP contributions?
I you are making traditional contributions, rememberthat those contributions are subtracted rom your pay beore tax. Be aware that stopping this type o contribu-tion could potentially increase your adjusted gross in-come and, as a result, your income tax liability. Also, think careully about terminating your contribu-tions. One o the great things about your SP con-tributions, no matter how small, is that the earningscompound over time. I you stop your contributions,even or a short time, you’ll miss this opportunity al-together. And, i you are a FERS participant, you areleaving ree money on the table because i you stop yourcontributions, your matching contributions stop as well.
Should I consider a fnancial hardshipwithdrawal?
For some, sequestration and the resulting urloughs willcause a signicant nancial hardship. But beore youconsider a SP hardship withdrawal, keep in mind a ew things:
able to make any SP contributions or 6 monthsater having received your unds.
contributions andthe earnings associated with them, and the totalamount cannot exceed your nancial hardship.
o any withdrawal, and you may also be subject toa 10% early withdrawal penalty tax.
I you have been urloughed as a result o sequestration, you may be wondering how to deal with the nancialimpact. Tis act sheet addresses some o the questions you may have about your SP contributions. It also de-tails alternatives or accessing your SP unds should you ace nancial hardship as a result o being urloughed.
FERS reers to the Federal Employees’ Retirement System, theForeign Service Pension System, and other equivalent Governmentretirement plans.