Army Family Team Building Level I

Introduction to Family Financial Readiness

Thrift Savings Plan

(www.tsp.gov)

The Thrift Savings Plan (TSP) is a Federal Government-sponsored retirement savings and
investment plan. Congress established the TSP in the Federal Employees' Retirement
System Act of 1986. The purpose of the TSP is to provide retirement income.

On October 30, 2000, the Floyd D. Spence National Defense Authorization Act for Fiscal
Year 2001 (Public Law 106-398) was signed into law. One provision of the law extended
participation in the TSP, which was originally only for Federal civilian employees, to
members of the uniformed services.

The TSP is a defined contribution plan. The retirement income that you receive from
your TSP account will depend on how much you have contributed to your account
during your working years and the earnings on those contributions. The TSP offers the
same type of savings and tax benefits that many private corporations offer their
employees under "401(k)" plans. TSP regulations are published in title 5 of the Code of
Federal Regulations, Parts 1600 ~ 1690, and are periodically supplemented and
amended in the Federal Register.

How does the TSP differ from the uniformed services retirement system?

In contrast to the TSP, the uniformed services retirement system is a defined benefit
program. This means that the benefit you receive from the uniformed services
retirement system (i.e., your retired pay) is based on your years of service and the rank
you hold at the time of your retirement, rather than on the amount of your contributions
and earnings, as is the case with the TSP.

In addition, unlike participation in the uniformed services retirement system,

participation in the TSP is optional. To participate in the TSP, you must sign up with
your service. You contribute to the TSP from your own pay; the amount you contribute
and the earnings attributable to your contributions belong to you. They are yours to
keep even if you do not serve the 20 or more years ordinarily necessary to receive
uniformed services retired pay.

What are the major features of the TSP?

You can contribute up to 9 percent of your basic pay each pay period to your TSP
account as soon as you become a member of the uniformed services. If you contribute
to the TSP from your basic pay, you may also contribute from one to 100 percent of any
incentive pay or special pay (including bonus pay) you receive, up to the limits
established by the Internal Revenue Code.
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The TSP offers the following:

ƒ Immediate member contributions.

ƒ Before-tax savings and tax-deferred investment earnings.

ƒ Daily valuation of accounts.

ƒ Low administrative and investment expenses.

ƒ Transfers into the TSP from other eligible retirement plans or traditional IRAs and eligible
employer plans.

ƒ A choice of five investment funds:

(1) Government Securities Investment — (G) Fund
(2) Fixed Income Index Investment — (F) Fund
(3) Common Stock Index Investment — (C) Fund
(4) Small Capitalization Stock Index Investment — (S) Fund
(5) International Stock Index Investment — (I) Fund

ƒ Ability to make contribution allocations daily.

ƒ Ability to make interfund transfers daily.

ƒ Loans from your own contributions and attributable earnings while you are in service.

ƒ Catch-up contributions for participants age 50 or older.

ƒ In-service withdrawals for financial hardship or after you reach age 59½.

ƒ Portable benefits and a choice of withdrawal options after you separate from service.

ƒ Ability to designate beneficiaries for your account balance.

ƒ Spouses' rights protection for loans and withdrawals and recognition of qualifying court orders.

ƒ A Website with general account information. It provides the ability for requesting contribution
allocations and interfund transfers, the option of initiating (and possibly completing) loan
applications, withdrawal requests on-line, up-to-date TSP materials and information, on-line
participant statements, calculators to estimate account growth, loan payments, annuity
amounts, as well as an elective deferral calculator. (Separated employees can also update their
address information on the Web.)

ƒ An automated telephone service (the “ThriftLine”) for account information and certain
transactions

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Army Family Team Building Level I

How do I start my contributions to my TSP account?

To start contributing to the TSP, ask your service for the TSP Election Form (TSP-U-1),
download it from this Web site, or use your service's electronic version if one is
available. Complete the form to show what percentage of basic pay, incentive pay,
special pay, or bonus pay you want to contribute, and submit it to your service.
Remember, you must be contributing from basic pay in order to contribute from
incentive or special pay (including bonus pay). Your service will advise you of the
effective date of your election.

Your service will deduct the amount you choose from your pay each pay period and will continue to
do so until you submit another Form TSP-U-1 to stop or change the amount. Also, if you elect to
contribute from a bonus, your initial election will remain in effect and cover any future installments
of that bonus or any other bonus to which you become entitled. If this is not what you intend, you
will need to terminate your bonus election once the contribution from the current bonus is
complete.

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