DEFINITION of 'Agency Matching Contributions'

Agency matching contributions are contributions to a Thrift Savings Plan (TSP) held by federal government employees. Employees of the federal government are eligible to receive contributions to their TSP from the agency for which they work.

A TSP, established by Congress in the Federal Employees' Retirement System Act of 1986, offers similar savings and tax benefits provided by private corporations to employees’ 401(k) plans. The amount government employees receive is based on how they have saved and earned over their course of employment.

BREAKING DOWN 'Agency Matching Contributions'

Through agency matching contributions, an agency can match 100% of an individual's contributions up to the initial 3% of his or her pay and a contribution of $0.50 for every dollar from the next subsequent 2% of pay used toward contributing to the thrift savings plan.

For example, a federal government employee working for the Department of Labor earns $1,500 each pay period and contributes 5% (or $75) into the thrift savings plan. The Department of Labor will then contribute a total of $60 (or 3% of $1,500 + (0.5 x 2%) of $1,500) toward his retirement in additional to his $75, which creates a total contribution per pay period of $135. After 5% of a salary, the agency won't match any additional contributions.

A further benefit comes from the fact that any matching contribution is not considered taxable income nor is it deductible the year it was made. However, even if you made your contributions to a Roth TSP, the matching contributions go into a traditional TSP plan. As a result, distributions of matching contributions, and the earnings on those contributions, are taxable.

Although you cannot access the contributions you’ve made to your TSP until a certain period of time has passed — usually two or three years, matching funds are not subject to vesting. Federal government employees that are able to contribute to a thrift savings plan should take advantage of the agency matching contribution.

  1. Agency Automatic Contributions

    Agency automatic contributions are contributions made by the ...
  2. Thrift Savings Plan - TSP

    A Thrift Savings Plan (TSP) is a retirement savings plan designed ...
  3. Employee Contribution Plan

    An employee contribution plan is an employer-sponsored savings ...
  4. Additional Voluntary Contribution ...

    An additional voluntary contribution is an extra allocation of ...
  5. Employee Savings Plan

    An employee savings plan is an employer-provided tax-deferred ...
  6. Retirement Contribution

    A retirement contribution is a payment into to a retirement plan, ...
Related Articles
  1. Retirement

    The Benefits of Using a Thrift Savings Plan (TSP)

    A thrift savings plan is a retirement savings plan that benefits federal employees.
  2. Retirement

    Work for the Government? Top Retirement Strategies

    Government employees don't receive Social Security and 401(k)s for their government work. Learn about other tools to plan for a good retirement.
  3. Retirement

    How 401(k) Matching Works

    Find out how employer matching of your 401(k) contributions works, including how employer contributions are calculated and annual contribution limits.
  4. Retirement

    Breaking Down the TSP Investment Funds

    For investors seeking growth, income and capital preservation, the Thrift Savings Plan offered by the U.S. government is a great option to consider.
  5. Retirement

    What Is a Good 401(k) Match?

    The most common employer match is 50 cents on the dollar of up to 6% of your salary. In most cases, you should contribute enough to get the maximum match.
  6. Retirement

    5 Companies With the Best Retirement Plans

    Ever wonder how your company retirement plan stacks up against the country's best employers? Take a peek at these great retirement plans.
  7. Retirement

    5 Key Features of 401(k) Plans

    Understanding your 401(k) options and making the right decisions can have a big impact on your retirement savings.
  8. Retirement

    How Much You Should Contribute to Your 401(k)

    The easy answer to how much you should contribute to a 401(k) plan.
Trading Center