Reps. John Mica, R-Fla., and Owen Pickett, D-Va., have introduced a bill that would allow active members of the armed forces to participate in the federal government's tax-deferred savings plan for civilian employees, the Thrift Savings Plan.
Under the bill (H.R. 3933), military members would be able to contribute up to 5 percent of their basic pay to the Thrift Savings Plan. Taxes on contributions and investment earnings under the TSP are deferred until they are withdrawn.
Mica, chairman of the House Subcommittee on Civil Service, said the bill will provide a low- cost tool for dealing with recruiting and retaining qualified military personnel.
"Service men and women will be able to build up substantial savings over time without squeezing the already scarce resources of the Defense Department," he said. "This will ease the financial pressures that too frequently force dedicated men and women to abandon a military career in search of greener pastures."
"The men and women who fight our nation's battles and preserve the peace are no less deserving of this excellent opportunity to save for their future than their civilian counterparts," Pickett said.
According to Navy estimates, a service member who contributed only $50 a month from age 19 to 39 would build up $400,000 in savings by age 59, assuming an average rate of return of 10.5 percent.
Federal employees are putting their money in the TSP in record numbers, bringing the total amount of money invested in the 401(k)-style program to $61.7 billion.
Federal Employees Retirement System enrollees are permitted to contribute as much as 10 percent of their salaries to the TSP. Agencies match FERS employees' contributions up to 5 percent of salary, including an automatic 1 percent agency contribution all FERS employees receive.
Civil Service Retirement System employees are allowed to contribute up to 5 percent of their salaries to the TSP, but they receive no agency matching contributions.
The TSP funds have been performing well in the last year.
The million-plus workers and retirees with money in TSP's C fund, a stock fund, received a whopping 47.83 percent return for the 12 months that ended in March, according to the Federal Retirement Thrift Investment Board. This means that $1,000 invested in the C fund during the year would have increased in value to $1,478.30.
The Mica-Pickett bill has been referred to the Government Reform and Oversight and National Security committees for debate.
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