Key Points:
Understanding what vesting means
Determining your vesting date
It’s likely during your investigation of the TSP that you’ve come across the term, “vesting.” Quite simply, vesting means ownership. When you have full access to money that has been put aside for you, you are considered to be 100% vested.
Vesting Overview
For FERS employees, the term vesting means when you are entitled to keep your Agency Automatic (1%) Contributions and their earnings. There is no vesting requirement for your own contributions or Agency Matching Contributions.
You become vested after you work in the federal government for a certain number of years.
All years of service in a position eligible for the TSP count toward vesting even if you don’t contribute to the TSP during that time.
Most FERS employees become vested in Agency Automatic (1%) Contributions after three (3) years of federal civilian service. FERS employees in congressional and certain non-career positions become vested in Agency Automatic (1%) Contributions after completing two (2) years of service.
If a FERS employee separates from service before the vesting requirement is met, the Agency Automatic (1%) Contributions and associated earnings are automatically forfeited to the TSP. A FERS employee who dies in service is considered to be fully vested no matter how many years of service the employee had completed. This means that the employee’s beneficiary, or beneficiaries, will be entitled to all funds in the employee’s account.
CSRS employees have no vesting requirement because they do not receive agency contributions to their TSP.
What is My Vesting Date?
The date that your vesting period begins is determined by your TSP Service Computation Date (TSP-SCD). Look for your TSP-SCD on your quarterly and annual TSP Participant Statements. This date is reported to the TSP by your agency and will never be earlier than January 1, 1984.
Remember, you are immediately vested in your own TSP contributions and their earnings, as well as in any Agency matching contributions that you receive, and their earnings. Vesting applies only to Agency Automatic (1%) Contributions and their earnings.
Action Step:
Verify that your TSP-SCD is correct by checking your quarterly or annual TSP Participant Statement.
The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular individual or circumstance. This article is not intended to be a client-specific analysis or recommendation. Do not use this article as the sole basis for any financial decisions. Consider all relevant information. Information should not be considered as tax or legal advice. You should consult with your tax advisor and/or attorney regarding your individual circumstances.
© 2019 Tangerine Foundation. All rights reserved.