TSP contribution limits and your ERP

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Remember when the Defense Finance and Accounting Service accidentally continued to deduct Thrift Savings Plan, or TSP, contributions after people reached their annual contribution limit? It happened in 2021. Well, DFAS fixed it — in January 2022.

But the way it was reported on the leave and earnings statement confused a lot of people. So I have graphs here to show you what happened and how you can track your own LES.

For some information, there is an annual limit on the amount a person can contribute each year to a qualifying, employer-sponsored defined contribution plan. The TSP is an employer-sponsored defined contribution plan, so it follows these rules.

Some people really want to save in the TSP, so they set their contributions quite high. You can designate TSP contributions only as a percentage of each compensation type, not as exact dollar amounts. As a result, people who want to maximize their TSP contributions each year are challenged to get it right.

What happened in 2021?

Prior to 2021, DFAS was able to automatically reduce dues once the service member reached the annual limit. But a software change in 2021 created problems and did not automatically reduce TSP contributions when the total reached the limit. As a result, many people have overcommitted to their TSP accounts in 2021.

The IRS frowns on contributions over the limit, but it gives providers time to fix things. DFAS made the appropriate fixes in January 2022, but the way it is reported on the LES is just plain hard to read.

The example of a member of the service

A nice service member shared his ERP so I can show you all how to look on your own form. I’ve cropped the images very tightly to avoid sharing too much information, so you’ll have to trust me on things like dates.

Here is their ERP from December, showing that they contributed more than the limit in 2021. Their limit, because they are under 50, was $19,500. You can clearly see that they contributed too much.

This means that this service member overcontributed $828.12 in 2021.

DFAS refunded that amount to the service member in January 2022. But it also withdrew his regular monthly TSP contribution. And instead of putting them on two different lines, one line showing the amount reimbursed for the 2021 premium and the other line showing the regular 2022 contribution, DFAS just subtracted and combined it on one line.

So, this service member’s January LES shows a lower than expected TSP contribution in the Deductions section at the top of the LES.

But looking in the TSP section in the middle of the LES, you can see that they actually made a bigger contribution to the TSP.

There is no explanation that the amount shown in the Deductions section ($828.78) is actually the January contribution ($1,656.90) minus the 2021 excess contribution ($828.12). I guess they thought people would understand?

There’s a note about this in the Notes section, but it’s not very helpful.

So that’s what happened! If you overcontributed in 2021, you probably corrected it in January, but that may not be clear. Follow your own LES and see what you discover!

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