What are 'Agency Automatic Contributions'

Agency automatic contributions are contributions made by the federal government to an employee's TSP that equals 1% of his or her pay. Once federal government employees establish to a Thrift Savings Plan (TSP), the agency they work for automatically makes a contribution equal to 1% of their basic pay each payday. That occurs whether the employee contributes to his or her TSP or not.

Most commonly, this feature is in 401(k) plans, but it can also be included in the following types of plans that permit employees to make elective contributions: 403(b) plans, 457(b) plans, SARSEPs and SIMPLE IRA plans.

BREAKING DOWN 'Agency Automatic Contributions'

Agency automatic contributions are not added to taxable income for the current year's income taxes, reducing an employee’s wages by a default percentage. However, these automatic =contributions are subject to vesting parameters. Employees are entitled to keep them — and any earnings they accrue in the future — after working three years in their jobs.

Congressional and certain non-career government positions become vested after two years of service. If you leave federal service before satisfying the vesting requirement for your agency, automatic contributions and the earnings on them will be forfeited to the TSP. If you die during your service to the government, you will automatically be considered vested in your TSP account.

Example of an Agency Automatic Contribution Plan

For example, if a federal employee elects to make a 5% contribution toward his or her thrift savings plan, he or she will receive an equivalent amount from the government (assuming that you add the 1% contribution automatically gained from the agency automatic contributions to the 4% gained from the agency matching contributions).

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