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Key developments in the world of federal employee benefits: health, pay, and much more.

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The Federal Retirement Thrift Investment Board will unveil more information next week about a much-anticipated addition to the government's retirement program.

The board will publish details about implementing the upcoming Roth 401(k) option to the Thrift Savings Plan, which allows employees to invest income that already has been taxed. The new Roth TSP component will invest an employee's after-tax earnings and cannot be taxed when withdrawn, similar to a traditional Roth IRA. There will be no income limits on earnings from TSP's Roth option as there are on a traditional Roth IRA, which could make the feature more attractive to federal workers and service members.

The Roth option is a "game changer" for younger federal employees in particular, Gregory Long, the board's executive director, said during a Monday meeting. It could be more attractive for young service members who often receive annual allowances of $20,000 to $25,000 a year and don't want to get hit with taxes if they withdraw their money. The Roth option is a more compelling sell, Long said.

Federal employees should be able to enroll in the Roth option sometime between April and June, according to board officials.

Speaking of TSP, here's an important reminder: Feds can contribute up to $17,000 in tax-deferred money to the TSP in 2012. The Internal Revenue Service announced last fall that the cap on individual TSP contributions in 2012 would increase $500, from $16,500 to $17,000, as a result of the change in the cost-of-living index. The increase also applies to those who participate in 401(k), 403(b) and most 457 retirement plans. The catch-up contribution limit for those 50 and older remains the same, at $5,500.

The TSP cautions federal employees, particularly those at higher pay levels, to keep in mind the annual individual contribution limit throughout the year, as workers could lose some matching contributions from their agency if they reach the cap too quickly. Employees receive matching contributions only on the first 5 percent of their basic pay that they contribute each pay period. If employees reach the cap before the end of the year, their contributions and the agency matching contributions stop.

Hire Energy

A bill (S. 1160) that would allow the Energy secretary to hire more employees during the next five years for jobs requiring critical skills would cost the department about $30 million, according to an estimate from nonpartisan Congressional Budget Office.

A provision in the legislation gives the Energy Department head the authority to hire up to 120 employees -- including highly qualified scientists, engineers and critical technical personnel -- and pay them more money than currently is offered under the law. The Senate Energy and Natural Resources Committee approved the bill in December. "According to DOE, that provision would permit the agency to spend an average of about $50,000 more for compensation and benefits for such individuals," said the CBO cost estimate. If enacted into law, the measure would cost the department $2 million in 2012.

The term of appointment for such jobs cannot exceed four years, according to the bill.

The legislation makes several other administrative changes, although the increased costs would stem mostly from the hiring authority provision, CBO said. The bill would not affect direct spending or revenue, and therefore is not subject to pay-as-you-go rules.

Buyout Price Tag

Everything has a price. Agencies now have to pay an administrative cost associated with buyouts and early retirements. The fiscal 2012 omnibus included a provision requiring agencies to pay a fee for each employee who receives a buyout or early out in fiscal 2012.

What's the damage? It's $107.62 per retiree, according to a notice from the Office of Personnel Management. That's the amount equal to OPM's average unit cost of processing a retirement claim, which agencies will have to pay into the general Treasury's Civil Service Retirement and Disability Fund. The money will remain in the fund until paid out to OPM and deemed an administrative expense, according to the law.

 

Kellie Lunney covers federal pay and benefits issues, the budget process and financial management. After starting her career in journalism at Government Executive in 2000, she returned in 2008 after four years at sister publication National Journal writing profiles of influential Washingtonians. In 2006, she received a fellowship at the Ohio State University through the Kiplinger Public Affairs in Journalism program, where she worked on a project that looked at rebuilding affordable housing in Mississippi after Hurricane Katrina. She has appeared on C-SPAN’s Washington Journal, NPR and Feature Story News, where she participated in a weekly radio roundtable on the 2008 presidential campaign. In the late 1990s, she worked at the Housing and Urban Development Department as a career employee. She is a graduate of Colgate University.

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