Available to government employees, agency matching contributions are offered as part of the thrift savings plan’s benefits. The Federal government already contributes a required 1% to the employee’s savings plan whether they deposit anything or not. The matching contributions are made in addition to the aforementioned 1%.
The agency will match 100% of the employee’s contributions for the first 3% of their gross pay. They will further match, at 50 cents on the dollar, the next 2% of pay that is placed within the savings plan. This is free money! It is similar in nature to the matching contributions paid to private sector employees who participate in retirement accounts such as 401(k)s or 403(b)s.
Making use of such matching contributions is basic math. On top of the matching funds, employees have the opportunity to enjoy the benefits of compounding interest over their tenure with a government agency.
Employees are actually allowed to contribute up to 10% of their basic pay during each pay period. That takes into account the employee contributing 5% and having that amount matched by the employing agency.
Best of all, both the money the employee contributes and the matching contributions are immediately vested. There is no additional waiting period. Agency Automatic Contributions and attributable earnings are only vested after 2 or 3 years, depending upon the circumstances of employment.
By consistently contributing to one’s Thrift Savings Plan an employee will receive the maximum of both government contributions. Amounts that the employee contributes above 5% of their gross pay is not matched, but is permitted.