Check your 2021 TSP contributions now!
I’ve heard from three different servicemembers that the Defense Finance and Accounting Service and the Thrift Savings Plan have failed to stop their TSP contributions after reaching the elective deferral limit ($19,500 in 2021).
This problem is caused by a glitch in a January software change for catch-up contributions.
Before 2021, military servicemembers who turned 50 years old during the year had to start a separate contribution for the TSP’s catch-up contribution limit. (In 2021, that’s an extra $6500.) This was upgraded six months ago by a new “spillover method” for catch-up contributions.
It seems like a great idea:
Participants will no longer make separate catch-up elections in their electronic payroll systems either. Employing agencies/ services will submit catch-up contributions on the same payroll records used to submit the equivalent record for regular contributions. Those contributions will continue until catch-up eligible participants reach the combined elective deferral and catch-up limits for the year.
The TSP system will determine if the participant is eligible to make additional contributions toward the catch-up limit based on the participant’s date of birth.
If the participant is eligible to make catch-up contributions, anything beyond the elective deferral limit will automatically start counting toward the catch-up contribution limit. These additional contributions will “spill over” until the participant meets the catch-up limit for those age 50 or older.
Unfortunately the software bug is popping up with servicemembers in the legacy High Three retirement plan who front-load their contributions. A few of these aggressive savers reached their elective deferral limit ($19.5K in 2021) with June’s contribution, and normally (before 2021) DFAS and the TSP would have stopped their TSP contributions for the rest of the year.
Our first alert about the software problem came in from a long-time reader on 24 June:
“Today, on my LES, I discovered that DFAS overpaid my TSP. I’m in the Legacy retirement system and June is usually when I max my TSP contribution of $19,500. In the past five years, once it hit the max, it halted further contributions. For some reason, it is no longer halting contributions past the limit. My LES is showing my YTD contribution to my Roth TSP as $23K.
I called DFAS and they stated an update was made to continue the contributions to the catch up limit of $26k, which should only apply to those 50 years of age, or older. They stated this is how it is now and that I have to do a CMS case to retrieve the over-contribution (this apparently takes two months). DFAS is working to fix it by October. In the meantime, I just have to eat the temporary reduction in pay and work a CMS case to retrieve the excess contributions.”
After speaking with DFAS, the reader’s finance office put out an announcement:
“Please tell members to stop their TSP deduction once they hit the $19,500 cap (if not catch-up eligible) to prevent it from continuing. If members exceeded the $19,500 limit, they should receive the extra TSP funds back in 1-2 months.
Due to a programming change in the TSP catch-up program, there are no longer separate caps of $19,500 for normal TSP and $6500 for TSP catch-up. As a result, the TSP limit has been changed to $26,000 erroneously.
If the member is age 50 or older, the contributions will continue to “spillover” until $26,000 and be applied as TSP catch-up. For members who are not 50 or turning 50 in this calendar year, the deduction will continue. When TSP receives the money, they will see if the member is entitled to catch-up. If not, the TSP will send a report to DFAS. DFAS will review and research the report and make appropriate TSP adjustments as needed and refund the spillover.
A permanent fix from TSP and DFAS should be implemented at the end of October.”
Another friend (younger than 50) reported: “I can confirm that once I learned about this I checked my account and so far I’ve contributed over $23,000 this year.”
More unhappy news came from a servicemember in the Facebook group “Personal Finance For U.S. Military Service Members and Families.” Here’s their report (edited for acronym clarity):
“My spouse is deployed to a combat zone on an aircraft carrier. Admin has messed up their pay for three straight pay periods. Combat Zone Tax-Exempt pay has been screwed up since March. My spouse’s May Leave and Earnings Statement had a $565.06 paycheck which was what we wanted and we put it all into the traditional TSP. In a combat zone with CZTE pay this should have gone in tax free and we were up to $28,664.76 on the May LES. But this pay period the June LES refunded his TSP contributions and he’s now back at $26,000.00. We were so careful and only took the Roth TSP contribution to $18,968.46 before he hit the combat zone. What happens to his tax-exempt TSP contributions if they fix his CZTE pay once they are out of the combat zone?”
(If you can’t see the Facebook post at that link, please read the note at the end of this post to apply to join the group.)
The only “good” news comes from a Coast Guard servicemember: “I can report that Coast Guard contributions correctly stopped at $19,500.”
If you’re in one of the other services, please check your TSP contributions! If you’ve exceeded $19,500 in 2021 (and you’re not age 50 this year or in a combat zone) then open a complaint in your finance office’s Case Management System. This is the same advice that DFAS or the TSP would offer if you actually managed to reach them on the phone.
If your TSP contributions have exceeded the EDL due to this programming glitch, please leave a comment to let us know how your finance office is handling it.
Here’s what a DFAS spokesperson shared with Kate Horrell and Military.com:
Officials with DFAS said they are tracking those who inadvertently contribute beyond the limit and “will return the excess TSP contributions back to those members,” a spokesperson said in an email to Military.com.
A DFAS spokesperson confirmed that the system upgrades are slated for this fall.
We have not yet seen an announcement from DFAS or the TSP, but when we do we’ll link it here and on social media.
(Note: If you’re in the Blended Retirement System, you should not front-load your TSP contributions. You want to contribute at least 5% from your base pay to your TSP account in every month of the year in order to maximize your DoD BRS matching contributions.)
(Note: Use this link to request your membership in the Facebook group “Personal Finance For U.S. Military Service Members and Families.” You’ll have to answer the screening questions to show a moderator that you’re a member of the U.S. military or their spouse.)
The Military Guide to Financial Independence and Retirement Price: By Doug Nordman: This book provides servicemembers, veterans, and their families with a critical roadmap for becoming financially independent.
Raising Your Money-Savvy Family For Next Generation Financial Independence Price: Raising Your Money-Savvy Family For Next Generation Financial Independence - The New Book from Doug Nordman & Carol Pittner
Maximizing Your Thrift Savings Plan Contributions In A Combat Zone
Contribution Limits of the Thrift Savings Plan + 401(k) + IRA = ?!?
Kate Horrell on Military.com: A Computer Programming Error May Contribute Too Much To Your TSP This Year