TSP transfers and rollovers

The Thrift Savings Plan will accept transfers and rollovers from qualified plans like a 401(k) or IRA, even if the participant is no longer in Federal service. See Form TSP-60 (for traditional TSP) and Form TSP-60-R (for Roth TSP) for precisely which plans are eligible for the TSP and Roth TSP.

Transferring assets into the TSP can have many advantages, including:
 * The TSP has extremely low-expense index funds.
 * The TSP has the G Fund, a unique fund available only to TSP participants.
 * As a qualified employer plan, assets held in the TSP do not count toward Backdoor Roth IRA pro rata rules.
 * Assets held in the TSP can be better protected from creditors compared to assets held in an IRA.

Disadvantages of transferring assets into the TSP include:
 * Lack of exotic funds if you wish to invest beyond the TSP's broad market index funds.
 * Inability to do Roth IRA conversion in the TSP, although the TSP is examining the idea.
 * Inability to hold a separate asset allocation in the Roth TSP portion compared to the traditional TSP portion.
 * Required minimum distributions apply to both traditional and Roth balances and are paid proportionally from both balances.
 * Lack of flexibility in TSP withdrawals, although these shortcomings will be mostly removed with the enactment and eventual implementation of the TSP Modernization Act of 2017

In deciding whether and how much to transfer or roll over into the TSP, consider the above advantages and disadvantages. For example, if you like the G Fund but still want to hold other funds outside the TSP, then transfer or roll over just enough to fill your desired allocation in the G Fund, and leave the remaining assets outside the TSP.

Contribution Allocation
If you transfer or roll over assets into your TSP, they will be added to TSP funds per your Contribution Allocation percentages not your Distribution of Account percentages. Therefore, especially if you are adding a large amount to the TSP, make sure your Contribution Allocation percentages are set to how you want to the incoming money to be allocated.

This can be an issue for TSP participants who have left service, and have subsequently changed their Distribution of Account percentages, but have not bothered to change their Contribution Allocation percentages because they are no longer contributing. For example, suppose have your entire TSP is in the G Fund (Treasuries), but back when you were a Federal employee, you set your Contribution allocations to be 100% C Fund (S&P 500 index) and haven't changed since. You are preparing to roll over a 401(k) into the TSP and want it to go to the G Fund, and you might assume it will go to the G Fund to replicate what your current allocation. But if your contribution allocation is still 100% C Fund, then that's where your roll over will go. You will then need to do an interfund transfer to re-allocate the money where you ultimately want it to be, and accept the market's closing price that day. If the stock market goes up that day, you got lucky because you'll be selling high. If it goes down, then you lost because you'll have locked in your losses. The opposite could also happen if your contribution allocations were 100% G Fund back when you were an employee, but today you have all your assets in the C Fund and also want your rollover to go there. To minimize potential regret, ensure your Contribution Allocation is appropriate to how you want your assets to be distributed.