New federal employees could roll over funds from their private sector 401(k) plans into the Thrift Savings Plan under a bill approved Thursday by the House Government Reform Subcommittee on the Civil Service.
The bill (H.R. 208) would also allow new employees to begin participation in the TSP immediately. Under current rules, they have to wait a year before contributing money to their TSP accounts.
Rep. Connie Morella, R-Md., sponsored the bill. She has introduced another bill, H.R. 483, that includes those two provisions but also would allow federal employees to contribute money to the TSP up to the IRS annual limit, which is $10,000 this year. Currently, federal employees under the Federal Employees Retirement System can only contribute up to 10 percent of their pay to the TSP, and Civil Service Retirement System enrollees are limited to 5 percent.
"At a time when we are encouraging Americans of all ages to save and invest more for their retirements, it is absolutely inequitable to arbitrarily restrict the ability of these employees to invest in their retirements in the same manner as private sector employees with 401(k) plans," Morella said on the House floor Feb. 9.
On Thursday, Morella also noted that Federal Reserve employees, who have a separate pension program from most other federal workers, are allowed to contribute up to 20 percent of pay to their retirement savings plan, as long as they do not exceed the IRS limit.
Morella introduced the bill that does not include the provision on contribution limits because that provision has faced opposition from budget crunchers who say it would cost the Treasury tax dollars. Contributions to the TSP are tax-deferred. The bill that the civil service panel marked up, with only the rollover and new employee participation provisions, should face less opposition, Morella has indicated.
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