Ooops… exceeded a TSP contribution limit

[Nords]

Well, my blissfully-ignorant faith in the system has been dashed once again upon the rocks of reality.

Spouse has 92% of her Reserve drill pay going into her TSP. (Another 7.45% goes to FICA and she frivolously spends the rest.) This has been an outstanding Reserve drill year for her, so as she approached the $15,500 limit (she's under age 50) I expected that the TSP would anticipate the limit and automatically cut her off.

Unfortunately her DFAS LES shows that next week, when her deposit hits her checking account, she'll have contributed $15,600 to the TSP.

No special pay or bonus money-- just straight base pay. We've never even been close to this situation before so I don't know if the TSP will actually kick back the excess and save us from DFAS' good intentions. We've tinkered with TSP contribution percentages before through MyPay, but if it's done at the wrong point in the cycle then the TSP automatically generates an indebtedness letter that confuses the heck out of the Navy pay people. So although we could mess with her contribution percentages, I'm extremely reluctant to perturb the system any more than we already have.

In the next few weeks we may hear from the TSP, and then there'll be all the fun of sorting out W-2s and IRA contributions. Is $15,500 indeed the limit for 2007? Has anyone else ever had this problem with the TSP, and how did you solve it?

[W2R]

I always contribute the maximum to my TSP (in 2006 it was $15,000 + $5,000 over-50 catchup) and last year due to my mathematical sloppiness and penchant towards rounding up to a nice sounding number, it came out about $62 over ($15,062 + $5,000 over-50 catchup).

What happened in my case was that my last paycheck was bigger, since the TSP cannot take more than the contribution limit (plus over-50 catchup). Luckily they still took enough for the FERS match. But they simply didn't take out the extra $62 from that last paycheck.

I'd be concerned, too! I'm sure they will have to return it to you.... sometime.... hopefully she will just get a bigger paycheck, like I did.

Yes, the limit is $15,500 for both 2007 and 2008.

[Twinkle Toes]

The short answer is yes it is a problem...IRS frowns on it. My story:

I worked for a fed org whose central office was in DC. Only a handful of people nation-wide maxed out TSP contributions. I exceeded the limit two years, '92 and '93, I think. IRS did an audit of payroll and found the problem...and the sh*t hit the fan. Seems that my org had a habit of letting these "over deferrals" slide because there were so few of them. To make IRS happy, my org agreed to correct the past two years. The org sent out distribution notices (can't recall exact tax form...too long ago) and a letter of explanation to be filed with my tax return (for the year in which the error was discovered). The org changed its payroll program to stop TSP contributions when the $ limit was reached.

Your org may let it "slide", but you still have time to get it resolved this year so you will never have to explain it to IRS. My suggestion:

1. contact your central payroll office, tell them about the error and ask them to return the amount which is in excess of the limit (going through HR and filling out the "change forms" won't get the problem solved soon enough...you need the over-deferral given back before year end and adjustments like this frequently have to be set up at least one pay period before they actually happen)

2. ask them to check to see if the payroll which is currently being processed also has a TSP contribution on it...if so, refund it, too

3. be sure that there will be no more TSP contributions until the first of the year

Good luck

Twink

[Twinkle Toes]

Quote:

Originally Posted by Want2retire I always contribute the maximum to my TSP (in 2006 it was $15,000 + $5,000 over-50 catchup) and last year due to my mathematical sloppiness and penchant towards rounding up to a nice sounding number, it came out about $62 over ($15,062 + $5,000 over-50 catchup). What happened in my case was that my last paycheck was bigger, since the TSP cannot take more than the contribution limit (plus over-50 catchup). Luckily they still took enough for the FERS match. But they simply didn't take out the extra $62 from that last paycheck. I'd be concerned, too! I'm sure they will have to return it to you.... sometime.... hopefully she will just get a bigger paycheck, like I did. Yes, the limit is $15,500 for both 2007 and 2008.

It's good to see that there have been some improvements since my early 90s experience.

[WM]

Nords, I was just thinking the other day it was about time to check in with you about this - I remembered you said it would be an issue this year. DH will have this problem next year, and being cynical, I assumed it would get screwed up and we'd have to fix it ourselves.

Thanks for the post, I'll be interested to see what they tell you to do. I always dread having to deal with the military pay systems, although MyPay has made some things easier.

Good luck!!

[martyb]

With my employer, the Air Force, I have the option to contribute either a percentage of base pay, which I currently do, or an actual dollar amount, which I plan to do next year to try an avoid running into this problem. I'll just take the max amount for the year, divide it by 26 pay periods and it should work out. Right Of course, this is the govt. we're talking about here....

[Nords]

Believe it or not, I may have to start trusting the system.

No matter when my spouse gets her LES on MyPay (or the direct deposit to her checking account), the Reserve's TSP contributions seem to be forwarded to the TSP custodian at the end of the month.

Yesterday, 1 Dec, her MyPay account showed an LES reimbursing the $100 as "Other credits" with remarks of "TSP CONTRIBUTION STOPPED 071205. ADJUSTMENT PAY: TAXAB PAY NO FICA. REFUND TSP REACHED MAX OF $15500.00" and her checking account shows a pending $100 deposit. Some of the LES' other TSP numbers are still wrong but her TSP account appears to have cut off the contributions at the limit. I bet that everything's OK on her W-2.

She's going on Reserve travel next week so we'll have more LESs to deal with soon. It'll be interesting to see if DFAS correctly stops her TSP deductions and then starts them up again in January. At this point I'm too afraid of the juggernaut to perturb the system with changes...

Now I have to unscrew her excess IRA contribution, but that was my fault.

[JDARNELL]

I was looking at my LES this week and there is a TSP statement on the bottom that says if your TSP contribution is more than you can contribute this month it will not be withdrawn. Now does that mean the difference will not be drawn or the enitre amount? I am at 14400. I may just adjust my percentage down to make sure I come under this month.

Tomcat98

[Nords]

Quote:

Originally Posted by Tomcat98 I was looking at my LES this week and there is a TSP statement on the bottom that says if your TSP contribution is more than you can contribute this month it will not be withdrawn. Now does that mean the difference will not be drawn or the enitre amount? I am at 14400. I may just adjust my percentage down to make sure I come under this month.

In spouse's case DFAS drew off the $287.10 TSP contribution on 23 Nov, but the TSP staff kept the $186.42 that put her up to the $15,500 limit (30 Nov) and returned the other $100.68 (it'll be here Tuesday).

No idea how DFAS & TSP will handle the pay she'll be getting later this month. And if the Reserves take as long to sort out her travel claim as they did earlier this year then she won't see the money until 2008 anyway.

So hopefully the Air Force active duty system is the same as the Navy Reserve and the TSP will take just enough of DFAS' contribution to put you at the limit while returning the rest in January.

Because if you adjust your TSP % down this month then you'll have to adjust it up again in January, and who knows what you'll see on your 2007 W-2!

[Fireup2020]

Thank you Mrs./CDR/LCDR Nords for paving the way! I hope to be in the same precarious position in '08! (hoping for a 90-180 day ADT/ADSW here locally as a final points push/TSP contribution year before 01Jan09 retirement date!)

Sounds like TSP is pretty on top of things Whew!

[Gworker]

If the USDA Finance Center does your payroll, remember next year has 27 pay periods in it. They just put a memo out about that on their website.
I guess I'll have to change my amounts then remember to change them back in 2009.

[deserat]

I'm about to have the same issue - however, last year, I had two tax deferred systems being used (civilian 403B and TSP) and oh, boy, was that a mess....scary mess - I've decided to keep to one system right now so that I don't have to juggle these things. Also waiting to see if Roth will need to be unwound again this year - sigh - they really don't want us to retire early, do they? You just can't save money if you make enough of it, they want it all to be spent.....

[deserat]

Update - they did it - overpaid TSP according to my 31 Dec LES - I sure hope this get 'righted' soon. Nords - did you call anyone? I also have another payment coming soon, but it all may end up in Jan 08....sigh - it's been a he!! of a December and we're only 2/3rds through.

[Nords]

Quote:

Originally Posted by deserat Update - they did it - overpaid TSP according to my 31 Dec LES - I sure hope this get 'righted' soon. Nords - did you call anyone? I also have another payment coming soon, but it all may end up in Jan 08....sigh - it's been a he!! of a December and we're only 2/3rds through.

Funny you should mention that. Spouse's Dec drills just posted today and everything's fixed. I'd give the DFAS/TSP system time to swap their data, especially if you can wait a few extra weeks for a corrected W-2.

I can vouch that attempting to fix the system is more time-consuming and ultimately worse than letting it limit cycle. No way do I want to spend that time in PSD talking to human beings about the interface between DFAS and TSP. (Sorry, Fireup2025, no offense intended, but you know what I mean.)

Unlike her active-duty days, my Navy Reserve spouse gets LESs dated whenever the pay people have processed the paperwork. So her Nov LES, the one where the TSP deduction put her over the limit, was dated the 23rd. But no matter the date on the LES, I think the DFAS pay deductions actually arrive at the TSP at the end of the month (no matter how many times you got paid that month) and the TSP processing site is where the annual contribution limit is checked (not by DFAS).

So her 23 Nov LES was wrong, but the TSP immediately & automatically kicked back the excess in a DFAS LES dated 5 Dec. (But I can't tell if the date of the TSP's action was 30 Nov or 1 Dec). The 5 Dec LES still had the wrong TSP totals (because DFAS hadn't updated its records from the TSP yet) but spouse's 31 Dec LES (which just posted today for drills on 6-7 Dec) is totally correct. It shows the correct annual taxable income, the correct annual TSP contribution, and everything has come back into alignment. I don't know why it's dated the 31st but maybe that's DFAS's way of telling us that anything she does over the next 12 days won't be paid until 2008.

I'm betting that DFAS's excess TSP deduction on your LES won't be noticed by the TSP system until 31 Dec and will be kicked back in early Jan. Since MyPay claims that Reserve W-2s are available on 2 Jan, your first W-2 will be wrong and you'll probably get a corrected W-2 in Feb.

DFAS's "late" W-2 won't be a problem for you because your brokerage/mutual-fund company will be sending you corrected 1099s until the end of April anyway!

I didn't call anyone, because in our house that's a different problem. "Hello, DFAS? I'm calling on behalf of my spouse, but she doesn't remember all the pay & tax vocabulary and she wants me to discuss the problem with you. She also has trouble remembering her verification data and her challenge questions, so when you're validating her ID please give her time to look up those answers. I'm turning the phone over to her now, and when you're satisfied that it's her then she'll give the phone back to me. OK? Hello? Hello?"

One minor question on spouse's 31 Dec LES is that her TSP contribution levels are now shown as 0% instead of 92%. That's probably because she's maxed out 2007, even though her contribution levels on her MyPay account still show as 92%. On 2 Jan 2008 I'll log onto MyPay and check her contribution levels again to see if they need to be set back to 92%, but I'm betting that the system is smart enough to take care of that without my help.

Ya know, MyPay coughed up my 1099-R last week with no fuss and no drama. It was totally correct, and it was the only time in 2007 that I logged into my account. So I think the only really effective corrective action for these pay/TSP problems would be for both you and my spouse to retire...

[TSP Skeptic]

I just increased my tsp contribution last month on mypay and checked my LES to see that it was enacted. However, when I checked the recent activities on tsp.gov, the numbers were different (old contribution amount). Has anyone experienced this before, and dose it eventually get corrected? I really don't like tsp because of its opaque nature. The website isn't very useful and doesn't seem to be updated in a timely manner. Any thought would be appreciated.

[W2R]

Quote:

Originally Posted by TSP Skeptic I just increased my tsp contribution last month on mypay and checked my LES to see that it was enacted. However, when I checked the recent activities on tsp.gov, the numbers were different (old contribution amount). Has anyone experienced this before, and dose it eventually get corrected? I really don't like tsp because of its opaque nature. The website isn't very useful and doesn't seem to be updated in a timely manner. Any thought would be appreciated.

I just go by my leave and earnings statement when looking for how much I am contributing. What it says is correct. I don't really look at the TSP site except to log in "read only", and see what my balance is from day to day.

[Nords]

Quote:

Originally Posted by TSP Skeptic I just increased my tsp contribution last month on mypay and checked my LES to see that it was enacted. However, when I checked the recent activities on tsp.gov, the numbers were different (old contribution amount). Has anyone experienced this before, and dose it eventually get corrected? I really don't like tsp because of its opaque nature. The website isn't very useful and doesn't seem to be updated in a timely manner. Any thought would be appreciated.

This is a kinda busy time of year for them. I'd give it until February to correctly reflect on the TSP's website, especially if it's OK on your LES.

After a couple months the two will match each other, or at least the TSP will reflect it correctly. I've had far more luck with the TSP folks eventually getting it correct than I ever had with DFAS...

As for the TSP's website & update rate, their expense ratio is 0.015% and it's been dropping steadily for the last five years-- probably the only "mutual fund" in the world to do so. With that record, I can forgive a lot of usability issues.

[kyounge1956]

Oh-oh! I just got a notice from my 457 plan custodian that "Excess Revenues" are being returned to Plan participants and will hit our accounts by Dec 19. I had my paycheck deductions figured to hit the maximum contribution + over-50 catchup right to the penny, so even though this is a small amount, it might put me over for the year. I think Nothing I can do about it if I am over, my last paycheck of the year was issued last week and anyway for some reason changes to contribution amount are not allowed to take effect immediately, they always start the following month.

I think I better call 'em tomorrow just to make sure I don't have a problem.

[TSP Skeptic]

Thanks for the responses. I guess I'll just be patient and hope they get it right eventually. Happy holidays.