In a few months some federal employees will be able to sock away extra money in their tax-deferred Thrift Savings Plan retirement accounts.
Approved by Congress last fall, these "catch-up contributions" allow federal employees to make up for the years that they may have been unable to contribute to the 401k-style retirement plan. In the days since, TSP board officials announced that eligible plan participants could begin making the extra contributions in August, readers have asked several questions about age requirements, contribution amount differences between Civil Service Retirement System (CSRS) participants and Federal Employees Retirement System (FERS) and maximum contribution rates in later years.
Q: Who is eligible?
A: TSP participants aged 50 and older by Dec. 31, 2003, who are currently on the federal payroll.
Q: How much can I contribute?
A: You can kick in up to $2,000 more per year than the standard limit on TSP contributions. For FERS participants the standard limit per pay period is 13 percent of pay. For example, an eligible FERS employee earning $50,000 annually who contributed the maximum 13 percent-$6,500-of his income in 2003 could boost that contribution to as much as $8,500 with a catch-up contribution. The standard limit per pay period for CSRS participants is 8 percent, with an annual cap of $12,000 for 2003. A CSRS employee earning $50,000 a year, who put in the maximum 8 percent to TSP could contribute as much as $6,000 in 2003 using the catch-up contribution.
Q: Will the federal government contribute matching money equal to the catch-up contribution amount?
A: No.
Q: Are these pre-tax dollars?
A: Yes, regular TSP and catch-up contributions are deducted from your paycheck before taxes are deducted.
Q: Can I write a check for my catch-up contribution?
A: No, catch-up contributions can only be made through payroll deduction.
Q: Is this a one-time only opportunity?
A: No, the maximum contribution level is $2,000 in 2003, $3,000 in 2004, $4,000 in 2005 and $5,000 in 2006. You can contribute any amount up to the annual maximum each year.
Q: When can I sign up?
A: You can begin signing up in July and start contributing in August.
Q: Will I have to designate a separate investment allocation for catch-up contributions?
A: No. Catch-up contribution dollars will be allocated in the same way your regular TSP contribution is allocated.
While the TSP board has already distributed information for agencies about the new catch-up contributions, a TSP spokesman said Monday that detailed information for federal employees is forthcoming.
Pay Raise
On Tuesday, House Minority Whip Steny Hoyer, D-Md., urged the president to promptly issue the necessary executive order to enable civil service employees to get the full 4.1 percent pay raise approved in the fiscal 2003 omnibus spending bill signed last week. The pay raise is retroactive to the first pay period of 2003.
"Federal employees should begin receiving the pay that they have been promised by the government in recognition of their hard work and dedication," Hoyer said. "Many federal employees, like their private sector counterparts, live paycheck to paycheck to support their families and the extra money is something they have counted on to counter increasing rent, gas, or other bills. This pay adjustment provides $26.20 each pay period for the average federal employee in the Washington region. This is real money for a lot of federal employees."
Before federal employees can see that extra money in their paychecks, President Bush must issue an executive order declaring if or how the raise will be divided between the across-the-board portion of the raise and locality-based increases.
On Wednesday, American Federation of Government Employees Union President Bobby Harnage also pressed the administration for the executive order and asked that the extra 1 percent be awarded as locality-based pay.
"So focused is he on eliminating taxes for multimillionaires, that he appears to have no appreciation for the toll his delaying tactics have on the hard-working Americans who make up the federal workforce, most of whom earn less per year than the targets of his tax cuts receive in dividends in a single month," Harnage said. "The additional one percent in salary adjustment may be beneath this president's regard, but 1.8 million federal employees need him to fulfill his responsibilities so that they can get on with their own responsibilities to their families, their landlords, their grocers, and their credit card companies."