MEMORANDUM
DATE: December 10, 2024
TO: Federal Personnel and Payroll System (FPPS) User Group Representatives and Client Accounting Offices
FROM: Christine Zertuche-Rocha, Chief, Payroll Operations Division, and Robert Crest, Chief, Personnel and Payroll Systems Division
SUBJECT: Action Required: 2025 Thrift Savings Plan (TSP) Contribution Changes - Highter Catch-Up Limit to Apply at Ages 60-63
On December 29, 2022, President Biden signed the Setting Every Community Up for Retirement Enhancement Act of 2022 (also known as SECURE 2.0 Act) into law to help employees save more for retirement. Effective January 1, 2025, tax year 2025, the higher catch-up limit applies to employees at ages 60, 61, 62, and 63. SECURE 2.0 Act, increases the catch-up contribution limit for active participants in the year in which they turn ages 60, 61, 62, or 63 to either $10,000 or 50 percent more than the regular catch-up contribution limit, whichever is greater. The limit reverts to the regular catch-up contribution limit in the year in which they turn 64. The Interior Business Center (IBC) is requesting Servicing Personnel Offices (SPOs), and Payroll Coordinators/Liaisons to please share this information with all employees.
With the 24.03 FPPS release, effective pay period (PP) 2025-01, the system has been updated to allow the higher contribution limit for those who are 60-63 in tax year 2025. Employee contributions will continue to utilize existing TSP pay codes thus reporting on the Leave and Earnings Statements and Form W-2, Wage and Tax Statement, will remain the same. Employees would need to contribute more than the five percent of basic pay to reach the spillover contributions, as such there should not be an impact to agency budgets.
The below table reflects the catch-up contribution limit amount, to include the high limit, by birth year. Please note the year an employee turns the age of 64: If an employee reaches the higher catch-up contribution limit during their years of eligibility, it is important for employees to adjust their contribution election at the beginning of the year they turn 64. This adjustment is necessary to avoid reaching the lower catch-up limit too early, which could result in the loss of any government matching contributions for the remainder of the year.
Year of Birth | Catch-Up Contribution Limit |
1961 or earlier | $7,500 |
1962 - 1965 Higher Catch-Up Limit: $7,500 + $3,750 (50% of the regular catch-up limit) | $11,250 |
1966 - 1975 | $7,500 |
At the time we issued our user group communication dated November 26, 2024, with the subject: “Payroll Reminders for Year End 2024 and New Year 2025”, we had not shared the 2025 higher catch-up limit for those ages 60-63 that went into the 24.03 FPPS release. The higher catch-up limit contributions will be treated using the spillover method outlined in our aforementioned “Payroll Reminders” user group communication, except at the higher limit.
Spillover contributions, to include the higher catch-up limit for those age 60-63 for tax year 2025, should be included with regular traditional and/or Roth contributions when making elections in Employee Express (EEX). TSP deduction changes to be effective in PP 2025-01, can now be made in EEX by entering “12/15/2024” in the Future Effective Date field. EEX allows changes to the Effective Date up to 90 days in advance. Employees can change TSP deductions at any time.
The chart below provides an example (dollar amount contributions) for calculating PP election amounts in EEX to include the higher catch-up contributions for those born in 1962-1965. In each scenario, the TSP Traditional Maximum contribution must be met before any catch-up contributions can “spillover”:
Example: 2025 Maximum TSP Traditional Contributions and Maximum Spillover Contributions for someone born between 1962-1965 (60-63 ages) | Contributions | PP Dollar Amount Contribution |
Maximum TSP Traditional (Pre-Tax) contributions met: | $23,500 |
|
Maximum spillover catch-up contributions (Must meet TSP Traditional maximum prior to contributing to spillover): The current regular catch-up contribution is $7,500, 50% of that is $3,750. | $11,250 | |
Total Maximum contributions allowed: | $34,750 | |
26 PPs in 2025 (It is suggested to round up the biweekly deduction to $1,337. The last PP of tax year 2025 (PP 2025-26), will have a reduced contribution of $1,325 to ensure the deduction amount does not exceed the limit for the year). | *$1,337 | |
Effective date | 12/15/2024 | |
If you have any questions, please contact the IBC Customer Support Center at Payroll_Helpdesk@ios.doi.gov or by phone at 1 (866) 367-1272.