No, you generally cannot contribute 100% of your entire pay to the Thrift Savings Plan (TSP). While you can elect to contribute up to 100% of certain specific pay components like incentive pay, special pay, or bonus pay, there are crucial conditions regarding basic pay and ineligible income sources that prevent a full 100% contribution of all your earnings.
Understanding TSP Contribution Rules
The Thrift Savings Plan (TSP) offers flexibility in how you contribute from your earnings, allowing you to maximize your retirement savings. However, not all types of pay are treated equally when it comes to contributions, and specific rules apply to ensure a structured approach to saving.
Eligible and Ineligible Pay for TSP Contributions
Your ability to contribute to the TSP depends on the source of your income. The rules are designed to differentiate between regular earnings, special payments, and various allowances.
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Pay You Can Contribute Up To 100% From:
You have the option to contribute a high percentage, up to 100%, from the following types of pay:- Incentive Pay: This includes various forms of performance-based awards or specific duty incentives.
- Special Pay: Compensation provided for specific skills, challenging duties, or unique circumstances.
- Bonus Pay: Additional payments often awarded for achieving specific goals or as a general reward.
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Crucial Condition for 100% Contributions:
Even when contributing 100% from incentive, special, or bonus pay, a fundamental rule applies: you must also elect to contribute at least 1% from your basic pay. This ensures a foundational contribution from your primary salary, making it impossible to contribute 100% of your basic pay if you are simultaneously taking 100% from other eligible sources, and effectively preventing 100% of your entire pay from going into TSP. -
Pay You Cannot Contribute From:
Certain income sources are explicitly excluded from TSP contributions. These are typically allowances intended for specific living expenses and cannot be designated for your retirement savings:- Housing Allowances: Funds provided to cover your housing costs.
- Subsistence Allowances: Funds allocated for daily living expenses, such as food.
Practical Implications for Your Contributions
Consider these scenarios to understand how these rules affect your TSP contributions:
- Scenario 1: Maximizing a Bonus
If you receive a \$5,000 bonus, you can elect to contribute the entire \$5,000 (100%) of that bonus directly into your TSP account. However, this is only permissible if you also have an active election to contribute at least 1% from your basic pay. - Scenario 2: Total Gross Pay Limitations
Imagine your total monthly pay comprises \$3,000 in basic pay, a \$500 special pay, and a \$400 housing allowance. While you could contribute 100% of the \$500 special pay, and a percentage (e.g., 5%) of your basic pay, the \$400 housing allowance cannot be contributed at all. Therefore, your total gross pay (including the housing allowance and the portion of basic pay not contributed) cannot be 100% directed to your TSP. - Scenario 3: The Role of Basic Pay
The requirement for "at least 1% from your basic pay" means that basic pay has a distinct rule. You cannot bypass contributing from basic pay, even if you are contributing heavily from other sources. This condition directly impacts the "100% of my pay" question, as it means basic pay itself isn't fully available for a 100% contribution election if other pay types are also at 100%.
Contribution Breakdown
The following table provides a clear overview of how different types of pay can be contributed to your TSP:
| Pay Type | Contribution Percentage Range | Key Condition/Note |
|---|---|---|
| Incentive Pay | 1% - 100% | Requires at least 1% contribution from Basic Pay to be elected simultaneously |
| Special Pay | 1% - 100% | Requires at least 1% contribution from Basic Pay to be elected simultaneously |
| Bonus Pay | 1% - 100% | Requires at least 1% contribution from Basic Pay to be elected simultaneously |
| Basic Pay | At least 1% (up to annual limits) | Mandatory minimum 1% election; you generally contribute a percentage, not necessarily 100% of it |
| Housing Allowances | 0% (Ineligible) | Cannot be contributed to TSP |
| Subsistence Allowances | 0% (Ineligible) | Cannot be contributed to TSP |
For more detailed information on contribution types and rules, you can refer to The Thrift Savings Plan (TSP) official website on Making Contributions.
