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Thrift Savings Plan (TSP) Changes

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Effective in 2006, civilian and military employees are no longer subject to a percentage limit on the amount they may contribute to a regular Thrift Savings Plan account.

They may contribute the full amount allowed by the Internal Revenue Service annual elective deferral limit, which is $15,000 for 2006.

"TSP is a long-term retirement savings plan, which everyone should consider," said Janet Thomas, a human resources specialist at the Air Force Personnel Center here. "It's a great supplement to military and civilian retirement plans."

Investing in TSP is not limited to stocks. People can choose safer government securities or invest in the new Lifecycle Funds.

Open seasons were eliminated July 1, 2005, so employees may start, change, stop or resume their TSP contributions at any time (except those in the 6-month non-contribution period following a financial hardship in-service withdrawal).

TSP offers investors the chance for lower taxes each year they contribute while not having to pay taxes on earnings until they reach retirement.

Eligible employees can take out loans, make in-service withdrawals from their TSP accounts, and keep their account even if they leave military or federal civilian service.

Investment money is deposited directly from each paycheck "so you never have to think about it," Ms. Thomas said. "That makes it easy to 'pay yourself first' while only investing what you deem appropriate.

"As with any individual retirement account, the sooner you begin contributing, the better," Ms. Thomas said.

The five individual TSP funds are: the Government Securities Investment (G) Fund; the Common Stock Index Investment (C) Fund; the Fixed Income Index Investment (F) Fund; the Small Capitalization Stock Index Investment (S) Fund; and the International Stock Index Investment (I) Fund. Or participants may choose to invest in the new Lifecycle "L" Funds.

Information on TSP investment funds is available on the TSP Web site at: www.tsp.gov/rates/fundsheets.html.

Some of the specifics of the program include:

Military

-Effective in 2006, military members can contribute any whole percentage of their base pay, as long as the annual total of tax-deferred investment doesn't exceed $15,000 for 2006. Airmen also have the ability to invest all or part of their bonuses, special pay or incentive pay, as long as the member contributes from basic pay. Members may enroll in December, however, requested actions will not update until Jan. 1.

-Those serving in tax-free combat zones are allowed up to $44,000 in annual contributions.

-Military members can enroll or change their contribution amount through the Defense Finance and Accounting Service Web site: https://mypay.dfas.mil/mypay.aspx, or by filling out a form TSP-U-1 at local military personnel flights and finance offices.

-Contribution allocations (how an employee chooses to invest money among the investment funds) can be made by calling the TSP automated ThriftLine (1-877-968-3778 for employees in the 50 States, Virgin Islands, Puerto Rico, Guam, American Samoa and Canada; 1 (404)-233-4400 for employees elsewhere), or on the TSP Web site at: www.tsp.gov.

-For general TSP questions, call the Air Force Personnel Contact Center at (800) 616-3775. Specific TSP information is available for Air Force military personnel at: www.afpc.randolph.af.mil/mpf/TSP/thrift_savings_plan.htm.

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