TSP Match When Requesting a Refund of Excess Deferrals

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Wings5
Posts: 331
Joined: Sun Nov 16, 2014 4:17 pm

TSP Match When Requesting a Refund of Excess Deferrals

Post by Wings5 »

Hello Everyone. I work a civilian and federal job in the reserve component of the military.

I’m in the Blended Retirement System and contribute to the TSP and a 401k. What happens to my TSP agency match if I request a refund of excess deferrals?

Private company: I contribute $22k to a traditional 401k and get a $22k match.

Government job: I contribute $5k to the Roth TSP and get a $5k match.

For 2024, I’ve contributed $27k and I’m over by $4k. I request a refund from the TSP.

According to https://www.tsp.gov/publications/tspfs07.pdf

A federal employee can request a refund of any excess deferrals from one or more of the retirement plans in which he or she participates. Each plan then has the option of returning the employee’s excess deferrals plus associated earnings by April 15th of the year following the year in which excess deferrals were made.

It doesn’t specify what happens to the associated $4k match. Does this get taken out of the account? I’m hearing it stays.

Lastly, how would I account for an adjusted TSP contribution on my taxes?
“Spending money to show people how much money you have is the fastest way to have less money.” - Morgan Housel
Lyrrad
Posts: 835
Joined: Sun Jul 27, 2008 10:59 am

Re: TSP Match When Requesting a Refund of Excess Deferrals

Post by Lyrrad »

Wings5 wrote: Thu Feb 01, 2024 2:16 pm It doesn’t specify what happens to the associated $4k match. Does this get taken out of the account? I’m hearing it stays.
Are you sure? The document you linked says:
What happens to the Agency/Service Matching
Contributions that were associated with the excess
deferrals that were returned to me?


Your agency or service will be notified that you have requested
to have your excess deferrals and associated earnings returned
to you. Your agency or service is then required to remove the
Agency/Service Matching Contributions associated with these
excess deferrals.
With a 100% match in both plans, it might be better to pay the penalty to keep the match, assuming the TSP overcontribution penalty is similar to the 401(k) penalty.
Pops1860
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Re: TSP Match When Requesting a Refund of Excess Deferrals

Post by Pops1860 »

This thread has been moved to the “Personal Finance (Not Investing)" forum. Moderator Pops1860
The power of accurate observation is often called cynicism by those who do not have it. ~George Bernard Shaw
stan1
Posts: 14109
Joined: Mon Oct 08, 2007 4:35 pm

Re: TSP Match When Requesting a Refund of Excess Deferrals

Post by stan1 »

Wings5 wrote: Thu Feb 01, 2024 2:16 pm
For 2024, I’ve contributed $27k and I’m over by $4k. I request a refund from the TSP.

According to https://www.tsp.gov/publications/tspfs07.pdf

A federal employee can request a refund of any excess deferrals from one or more of the retirement plans in which he or she participates. Each plan then has the option of returning the employee’s excess deferrals plus associated earnings by April 15th of the year following the year in which excess deferrals were made.

It doesn’t specify what happens to the associated $4k match. Does this get taken out of the account? I’m hearing it stays.
By "hearing it stays" are you saying someone you know did this, and the match was not taken back? I think it would be clear that if the contribution was refunded that the match should also be pulled back, but maybe this could be a manual process and some might slip through the cracks without having the match pulled. If there was an error I'd be prepared that the error could be identified and corrected in the future.
Topic Author
Wings5
Posts: 331
Joined: Sun Nov 16, 2014 4:17 pm

Re: TSP Match When Requesting a Refund of Excess Deferrals

Post by Wings5 »

Yes, a colleague was telling us that this was his technique. He said he didn’t want to lose out on the TSP match, so he contributes to both and then asks for a refund of his contribution.

I was and remain skeptical, although just paying the over contribution is something I haven’t looked into quite yet.
“Spending money to show people how much money you have is the fastest way to have less money.” - Morgan Housel
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