Proposal would add surviving spouse benefit to TSP
The Thrift Savings Plan offers an attractive retirement investment plan to federal employees, but the benefit does not extend to spouses after the federal worker passes away.
That policy is in line with private sector retirement funds, but one member of the TSP's Employee Thrift Advisory Council is pushing to change the rules. Richard Strombotne-who represents the Senior Executives Association at ETAC meetings-said he wants to change the TSP to allow spouses of deceased federal workers to leave their savings in Thrift accounts.
"The point is that the Thrift Savings Plan has such outstanding low administrative costs," Strombotne said. "If the surviving spouse has to leave the TSP, that spouse loses the benefits of those low administrative costs."
The TSP operates as a 401(k)-style retirement resource for federal employees. The plan has 3.3 million participants and more than $140 billion in assets. The cost for each TSP participant is significantly lower than the cost in comparable private sector plans.
Typically, the TSP costs participants about 7 basis points, or seven cents for every $100 invested. Comparable private sector plans can cost participants more than 60 basis points.
Strombotne first offered his proposal during an ETAC meeting earlier this month. TSP Executive Director Gary Amelio told council members that he believed the TSP should stand pat on this issue.
Thrift officials also said that the matter was not in their hands-any such change would require congressional action. Strombotne was not deterred, however, saying that he intends to bring his idea to lawmakers.
"Over its history, the TSP has been liberalized considerably," Strombotne said. "Those changes have been to the benefit of the account holders. This is another benefit to federal employees."
On Friday, House lawmakers approved one such liberalization of TSP rules, voting to eliminate open seasons--the limited windows where federal employees can join the Thrift plan or alter their contributions. If the bill is signed into law, employees will be able to join the Thrift plan or redistribute contributions at any time.
TSP officials say open seasons were useful when the plan was first launched, but have become obsolete. The Senate already has passed legislation to end open seasons.
"Every day, federal employees across the nation and around the globe perform critical duties that keep this nation running smoothly," House Government Reform Committee Chairman Tom Davis, R-Va., said Friday. "Away from work, they experience all of life's events, births or deaths in the family, new homes, new jobs, salary adjustments, and so on. With enactment of H.R. 4324, TSP participants can adapt their retirement savings to meet their changing circumstances."
Because the House and Senate bills are identical, the legislation will almost certainly move to the White House intact for President Bush's signature.