If you are a FERS employee and you wish to make the maximum regular contribution of $17,000 in 2012 (limited by the Internal Revenue Code), you should consider dividing your total contribution amount evenly over the total number of pay dates in 2012. Otherwise, if you reach the IRC limit before the end of the year, your payroll office will automatically suspend your contributions until the first pay date in 2013.

If your regular contributions are suspended, you will continue to receive the automatic 1% agency contribution, but you will be missing out on the additional 4% agency match for the rest of the year. It would be like refusing free money! This lack of agency matching contributions and potential growth could be a significant loss over a period of years.

Some employees contribute as much as they can afford to contribute earlier in the year to try and maximize their earning potential.  There’s nothing wrong with a CSRS employee doing this because CSRS employees do not receive any Agency Matching Contributions.  But in most cases, as an employee under FERS, the amount of money that you are losing (or missing out on) in Agency Matching Contributions (and potential earnings) are greater than the additional earnings you might have because you made all of your contributions earlier in the year.

As a FERS employee, if you want the full 5% Agency Matching Contribution (and the potential future earnings on such contributions), you must be making a regular contribution of at least 5% of your basic pay every pay period of the year.

If you are already 50, or if you are going to be 50 later this year, you can also set up a Catch-up contribution up to $5,500 if you can show that your regular TSP contribution will reach the $17,000 limit by the end of the year… but keep in mind, FERS employees do NOT receive agency matching contributions on their Catch-up contributions. FERS employees only receive the extra 4% agency match on the employee’s regular contribution.