15,040 grads of the Ultimate Military Credit Cards Course already know why
The Platinum Card® from American Express is my #1 recommended card
Military Money Manual has partnered with CardRatings for our coverage of credit card products and may receive a commission from card issuers. Some or all of the cards that appear on this site are from advertisers and may impact how and where card products appear on the site. This site does not include all card companies or all available card offers. Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Thank you for supporting my independent, veteran owned site.
Update 8 Oct 2014: Another email received from DFAS. See below for email #2. It appears this only applies to Active Duty Air Force personnel. You will need to redo your Roth TSP allocations in myPay in January to keep them going. Spread the word!
I received the following email from DFAS on 2 October 2014. I don’t know if this applies to other military branches as well or just the Air Force. I have not found any information on the DFAS website either. As I find more information I will continue to update this post.
According to this email, you will need to update your TSP elections by January 31, 2015 to ensure that your contributions are not interrupted. It looks like DFAS and the TSP are moving to a percentage based system, where you elect to contribute x% of your basic pay, bonus pay, etc, rather than a fixed dollar amount. This is how the traditional TSP is set up today.
I'm not sure if I like this system better or the fixed dollar amount. The fixed dollar amount is nice because you can elect to contribute exactly the monthly limit to maximize your contributions by the end of the year. On the other hand, there might be more participants in the Roth TSP program if you only need to elect a percentage of your pay, rather than chose a dollar amount.
This is a great opportunity to start investing in the Roth TSP if you haven’t already. Or, if you are investing in the traditional TSP, this could be a great time to switch to the Roth option, which is better for military personnel in most cases.
The email reads:
Email #1
I would like to take this opportunity to advise you of an upcoming change to the ROTH Thrift Savings Program (TSP) that will require your involvement to allow your investment to continue without interruption.
Beginning February 2015, the Defense Finance and Accounting Service (DFAS) will implement capabilities that enable DoD to comply with Roth TSP requirements. In order to implement the changes, we will need you to submit new contribution elections.
Your current Roth TSP deductions will stop on January 31, 2015. If you want to continue contributing to Roth TSP after January 31, 2015, you will need to submit new elections as percentages of basic pay, special and incentive pay, and bonuses. Beginning January 1, 2015, you will be able to use myPay or hardcopy forms to select your new elections. Your new elections must be received by January 31, 2015 to ensure no interruption to your investment plans is experienced.
You can expect to receive additional information on this effort during November and December. We will be updating www.dfas.mil with the needed worksheets and instructions to assist you in making the new elections. We will also be providing periodic reminders about updating your contribution elections.
My POC for this effort Matthew Seyler at matthew.seyler@dfas.mil
Bruce N. Keith
Director, Military Pay
Enterprise Solutions and Standards
Email #2
Our records show that you participate in Roth TSP. If you wish to continue those contributions, you must submit a new Roth TSP election on myPay or submit a TSP election form to your finance office during the time period January 1-31, 2015. Otherwise, your Roth TSP contributions will stop after January 2015.
This requirement is due to pay system improvements that will more fully automate processing and provide better customer service to you.
Elections for Roth contributions for February 2015 will be accepted January 1 to 31, 2015. You may enroll online with myPay or submit the revised paper election form, TSP-U-1 to your finance office. The revised TSP-U-1 (1/2015) will be available on www.tsp.gov on January 1st.
More information as well as worksheets to help you calculate your contribution will be available on www.dfas.mil in early December. We'll remind you again of these changes in the coming months to make sure your financial plans continue.
Thank you for your attention. It's always a privilege to serve you.
My POC for this effort is Matthew Seyler at matthew.seyler@dfas.mil.
Bruce N. Keith
Director, ESS Military Pay
Spencer, I went over my contribution limit for year 2013 while I was deployed. And while it is true that you will get your money back, it took me about 2 months to sort out a Pay Inquiry with our finance office and DFAS. In the end the remainder will be returned to you, and they will credit you for gains and losses from the TSP fund. However, without an official Pay Inquiry to the finance office no action will be taken to correct the issue.
My overall experience was pretty inconvenient and required several phone conversations with DFAS/Finance Office to resolve the issue. As a result, for me getting as close to the contribution limit without going over it is worth the time not spent sorting it out after the new year. Hopefully next year DFAS will be able to streamline the process more efficiently for you, but my impression is that not a lot of personnel contribute beyond the contribution limits and as a result they don’t have a lot of experience correcting discrepancies.
Jason – really hoping I don’t have to go through the pain you did to get my money back! I think I slightly overcontributed last year, so we’ll see what happens. Also with the new system this year of having to figure out a percentage of base pay to contribute – talk about annoying!
TSP is great, but the change with the Roth TSP to only % makes the program more difficult to hit the annual max contribution amount. Having to tweak my % throughout the year to achieve max contributions is a bit inconvenient and requires more planning than I normally like to do.
However, on the Army side we’re still able to specify a dollar amount until January 1, 2015. So for 2015 (which is now an $18,000 limit), I calculate I’ll be able to contribution $17,999.11 to my TSP. I can do this by specifying a dollar amount for Jan ’15 ($1734), and setting a constant % for the remainder of the year (for me is 26%). The math works out to this: $1734 (Jan) + (11 months x 26% x base pay) = $17,999.11 (total contribution in 2015)
This method keeps it simple for me since it’ll be 26% for 11 months and I won’t have to think about it for the rest of the year. Unfortunately, this will only work for 2015 and in 2016 I will be required to tweak % as the year progresses.
Overall, I agree that the changes in the TSP program will probably result in personnel contributing more money to their TSP, but it is also an inconvenience for those in the position to contribute the full amount.
Jason – I think the easiest thing to do is to calculate the percentage of your base pay that lets you max out by December. For instance, if you get paid $5000 in base pay, and in 2015 you need to contribute $18,000 to max (or $1500/month), just take $1500/$5000 or 30%. If you round up and slightly over-contribute, apparently the TSP will only accept your contributions up to the max and return the rest in your paycheck. I’m testing that theory this year by automatically contributing about $50 over the limit.
I’m in the Army National Guard and started contributing Guard pay to Roth TSP last month. Thought it has always been percentage based.
It may already be in place for the Army, it might just be the Air Force that’s lagging on this (standard).