New Roth In-Plan Conversion Options for TSP Participants

Starting in late January 2026, participants in the Thrift Savings Plan (TSP) and their spouse beneficiaries will have the option to convert funds from traditional TSP accounts to Roth accounts. This process is known as a “Roth in-plan conversion.”

When converting from a traditional to a Roth TSP, the amount converted will be considered taxable income for that year. Essentially, you’ll be liable for income tax on this amount based on your applicable tax rate.

Understanding Traditional TSP vs. Roth TSP

Traditional TSP
With a traditional TSP, contributions are made before taxes, which can lower current income tax rates. However, when participants withdraw from their traditional TSP, they face taxes on both their contributions and any earnings at their current tax rate.

Roth TSP
For Roth TSP accounts, contributions are taxed before they go in, making them part of the participant’s taxable income for that contribution year. The usual tax withholdings apply here too.

Tax Implications of TSP Roth In-Plan Conversions

When thinking about a Roth in-plan conversion, the TSP suggests focusing on a few key questions regarding immediate tax implications:

• How will this affect my taxable income this year?
• What income tax will I owe on the amount I convert?
• Could this raise my federal marginal tax rate?
• Will I have enough funds to cover the taxes incurred from the conversion?

It’s wise for participants to consult tax advisors prior to initiating a Roth in-plan conversion since these conversions cannot be undone once executed.

Evaluating Roth In-Plan Conversions

The TSP mentions that participants can make Roth conversions at any time, including after retiring. A financial advisor can help figure out if and when it makes sense to convert, as many people prefer to do this during years with lower income and marginal tax rates.

Eligibility for Roth In-Plan Conversions

Active and Separated TSP Participants
Active TSP participants and those who have separated from service can request a conversion if they have at least $500 in confirmed balances. They must keep at least $500 in each non-Roth payroll account source for the conversion to be valid.

TSP Spouse Beneficiaries
Spouses with a minimum balance of $500 can also request a conversion, and the retention requirement does not apply to them.

Conversion Frequency and Request Process

TSP participants can opt for up to 26 Roth conversions per account each calendar year. Participants with both Civilian and Uniformed Service accounts may request the same number of conversions for each account.

To initiate a Roth in-plan conversion, eligible participants and their spouses should visit TSP.gov. They can choose either a specific amount or a percentage of their eligible funds for conversion. The minimum amount for a conversion request is $500, but if the selected amount falls below that after market close, the conversion will still proceed with the available funds. Spousal consent is not necessary.

Minimum Conversion Amount

The minimum amount to convert in one request is $500. Active or separated participants must leave this amount across their non-Roth salary account sources for any future salary adjustments. Rollover sources don’t have this requirement.

As per IRS regulations, once a conversion from traditional to Roth is made, that decision cannot be reversed.

Further Insights on TSP Roth In-Plan Conversions

In an upcoming issue, a federal retirement columnist will explore the advantages and disadvantages of TSP Roth in-plan conversions. For more detailed information, you can check TSP resources available online.