Nondiscrimination Rules for Thrift Savings Plan
GGD-87-80BR: Published: May 22, 1987. Publicly Released: Jun 3, 1987.
- Full Report:
Pursuant to a congressional request, GAO reviewed Internal Revenue Code provisions which allow employees to defer taxes on contributions to the federal thrift savings plan until retirement.
GAO found that, since tax reform: (1) the nondiscrimination rule limits the contributions of highly paid federal and public schools employees to not more than one and one-quarter times the percentage of salary deferred by other employees; (2) the rule does not apply to plans available to other tax exempt organizations; (3) federal employees covered under the civil service retirement system have no incentive to participate in the thrift savings plan, since they are eligible to make tax-deferred contributions to individual retirement accounts (IRA); and (4) employees cannot withdraw funds in the thrift plan unless they left government service, transferred the money to IRA, and paid a 10-percent penalty.