Pay & Benefits Watch Pay & Benefits WatchPay & Benefits Watch
Key developments in the world of federal employee benefits: health, pay, and much more.

Leave With Pay


Many federal employees lately have been thinking a lot about saving for retirement. One idea currently being kicked around inside the Beltway is allowing government workers to roll their unused annual leave into their Thrift Savings Plans.

President Barack Obama endorsed the idea during his Labor Day radio address in September. "The rules ought to be written to encourage people to save instead of discouraging them," he said.

The Federal Retirement Thrift Investment Board is looking into the idea, which would require a change to the 1986 Federal Employees Retirement System Act. The law states that only basic pay, or bonus and special pay for uniformed service members, can go into a Thrift Savings Plan. When federal employees leave government for any reason, they can receive lump-sum payments for their unused leave; under the law, however, it is not considered part of their pay.

The option to contribute unused leave toward a 401(k) retirement account is available to private sector employees -- if their individual plans allow it -- through two Internal Revenue Service rulings, 2009-31 and 2009-32.

Congress currently is considering a separate proposal to allow workers in the Federal Employees Retirement System to count their unused sick leave toward their retirement annuities. That legislation affects only the defined retirement benefit portion of FERS, not the TSP, which operates as a defined contribution plan.

Spousal Accounts

The TSP enhancements recently enacted include spousal accounts, which allow the survivor of an enrollee to stay in the plan after an enrollee's death. The TSP board says the accounts likely will be available in 2010. Click here for some FAQs about spousal accounts.

In the meantime, the board is implementing an interim program to ensure that the surviving spouse of a deceased enrollee does not lose the account. Currently, upon notice of death, all accounts are transferred to the government securities fund (G Fund) until a beneficiary is identified. The interim program will ensure that a surviving spouse is notified of their options, and will be able to keep the money in the G Fund until the spousal accounts options are implemented.

"This feature should be of great benefit to spousal beneficiaries because it eliminates the need to address any TSP issues during a time of emotional distress," TSP Director of Office Participant Services Pamela-Jeanne Moran wrote in a report for the Federal Retirement Thrift Investment Board. "It will also allow them to make a sound withdrawal election when they are ready to do so, rather than unnecessary time constraints."

Once established, the spousal accounts will have some features of the traditional TSP offerings, but the surviving spouse will not be able to transfer money into the TSP. He or she still will have the option to cash out the plan, or transfer it to an Individual Retirement Account.

Close [ x ] More from GovExec