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Enrollment in the Thrift Savings Plan's fledgling Roth option spiked in December, especially among military service members. And the growing interest in the Roth option could lead to service members being automatically enrolled in TSP.
The Federal Retirement Thrift Investment Board, which manages TSP, said Monday that the number of military service members with Roth accounts nearly quadrupled in December, from 6,364 enrollees in November to 24,695 in December.
Overall, 101,000 TSP enrollees had Roth accounts at the end of December. That is a 38 percent increase from the 73,041 Roth accounts open in November, and nearly double the 51,354 accounts open in September.
The new Roth investment option, which was launched last May, allows participants to invest after-tax earnings into funds that will grow without tax liability on future earnings. This differs from the standard TSP plan, where before-tax dollars are invested and taxed when they are withdrawn. The Roth option is expected to primarily benefit military service members and select groups of federal employees, such as judges, who are likelier to have higher tax rates while in retirement than they do while working.
Greg Long, executive director of the TSP, said the growing interest among service members — if it continues — may mean it is time to reconsider automatically enrolling service members in TSP soon after they join the military.
"Roth is a game changer," Long said. "I can tell you for sure that DoD is paying attention to the pickup among their participants on Roth, and thinking about what that means."
The TSP began automatically enrolling newly hired civilian employees in 2010. Defense officials in 2009 said that TSP would need to have a Roth option before the Pentagon would support automatically enrolling new troops.
Army, Navy and Air Force service members were able to make their first contributions to Roth accounts in November, said Renee Wilder, the board's director of research and strategic planning, and participation quickly grew in the next month.
Long said TSP officials will discuss Roth and automatic enrollment with the Defense Department in April, at the next Employee Thrift Advisory Council meeting.