By Ian Berger, JD
IRA Analyst
Since 2010, participants in certain private sector 401(k) plans have been able to boost their Roth retirement savings by doing an “in-plan Roth conversion” of non-Roth plan funds to a Roth account within the same plan. This plan feature is optional, not mandatory, and a recent survey by Fidelity found that about 40% of the 401(k) plans it services allow in-plan conversions.
Starting January 28, 2026, the Thrift Savings Plan (TSP), a 401(k)-like retirement savings plan for federal civilian employees and uniformed services members, will also begin offering in-plan conversions.
Here are the rules governing TSP in-plan Roth conversions:
- In-plan conversions will be available to all TSP participants, including active participants, separated and retired participants, and spouse beneficiaries with accounts.
- The minimum amount for each in-plan conversion is $500. However, a minimum of $500 must be left in each account after an in-plan conversion. (This rule does not apply to rollover or spouse beneficiary accounts.) Aside from the $500 “leave-behind” requirement, there is no maximum in-plan conversion amount.
- Up to 26 in-plan conversions can be made per calendar year.
- Married TSP participants are not required to obtain spousal consent before doing an in-plan conversion.
- For participants subject to required minimum distributions (RMDs), the RMD for that year must be withdrawn before doing an in-plan conversion.
- Only funds invested in TSP funds are available for an in-plan conversion. Certain TSP participants are eligible to invest in non-TSP mutual funds. However, funds invested in non-TSP mutual funds are not available for in-plan conversion. Participants wishing to do an-plan conversion with non-TSP mutual funds must first sell their shares in those funds and request to have them transferred to TSP funds.
As with in-plan Roth conversions in private sector 401(k) plans, TSP in-plan conversions create taxable income in the year of the conversion and cannot be reversed or changed. In addition, because there is no withholding on in-plan conversions, participants may be required to make estimated tax payments to the IRS. Therefore, a TSP participant considering an in-plan conversion must make sure he has enough funds to cover the increased tax liability.
We encourage any retirement savings plan participant – whether in the TSP or not – to seek help from a knowledgeable financial advisor before taking the in-plan Roth conversion plunge.
If you have technical questions you would like to have answered, be sure to submit them to [email protected], to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/coming-soon-the-thrift-savings-plan-will-start-offering-in-plan-roth-conversions/