TSP Contribution Limits and Your LES

Remember when the Defense Finance and Accounting Service accidentally continued deducting Thrift Savings Plan, or TSP, contributions after people had reached their annual contribution limit? It happened in 2021. Well, DFAS fixed it -- in January 2022.

But the way it was reported on the Leave and Earnings Statement confused a lot of people. So I've got graphics here to show you what happened, and how you can follow along on your very own LES.

For some background, there is an annual limit on how much an individual person can contribute to an employer-sponsored, qualified defined contribution plan each year. The TSP is an employer-sponsored, defined contribution plan, so it follows those rules.

Some people really want to save in the TSP, so they set their contributions pretty high. You can designate TSP contributions only by percentage of each type of pay, not exact dollar amounts. As a result, folks who want to max out their TSP contributions each year are challenged to get it right.

What Happened in 2021?

Prior to 2021, DFAS was able to automatically curtail contributions once the service member reached the yearly limit. But a software change in 2021 created issues and didn't automatically curtail TSP contributions when the total reached the limit. As a result, many people overcontributed to their TSP accounts in 2021.

The IRS frowns on contributions in excess of the limit, but it does give the providers time to fix things. DFAS made the appropriate fixes in January 2022, but the way it is reported on the LES is just hard to read.

A Service Member's Example

One kind service member shared their LES so that I could show y'all how to look on your own form. I cropped the images very tightly to avoid sharing too much information, so you'll have to trust me on things like dates.

Here is their December LES, showing that they contributed more than the limit in 2021. Their limit, because they are under age 50, was $19,500. You can clearly see that they contributed too much.

That means that this service member overcontributed $828.12 in 2021.

DFAS paid that amount back to the service member in January 2022. But it also took their regular monthly TSP contribution. And instead of putting those on two different lines, with one line showing the amount repaid for the 2021 overcontribution, and the other line showing the regular 2022 contribution, DFAS just subtracted and put it together on one line.

So, this service member's January LES shows a smaller-than-expected TSP contribution in the Deductions section at the top of the LES.
 

But looking down into the TSP section in the middle of the LES, you can see that they did, in fact, make a larger contribution to the TSP.

There's no explanation that the amount shown in the Deductions section ($828.78) is actually the January contribution ($1,656.90) minus the 2021 overcontribution ($828.12.) I guess they thought people would figure it out?

There is a note about it in the Remarks section, but it's not very helpful.
 

So, that's what happened! If you overcontributed in 2021, you likely had it corrected in January, but that might be unclear. Follow along with your own LES and see what you discover!

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