As mentioned earlier, the TSP is officially considering allowing in-plan Roth conversions (from ‘Traditional’ TSP account balances) in the future. The next step is for TSP consult with the IRS.
Directly from the TSP webpage:
TSP examines in-plan conversion option — The President approved the American Taxpayer Relief Act of 2012, on January 2, 2013. This law allows the TSP and other qualified plans to give participants the option to convert their traditional account balances to a Roth balance. The amount converted would be taxable to the participant. We are currently waiting for tax reporting guidance from the IRS and will be studying the actions required to offer a conversion option. After that review, we will make decisions on whether to proceed.
Cynics may see this as an attempt by the Government to grab more tax revenue right now, but I maintain that more flexibility and choice in the TSP is always welcome news.
Even better, we Feds may be able to take advantage of Roth TSP Conversions if administrative furloughs place us in a lower tax bracket this year!
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