Legislation designed to enhance the ability of federal employees to save for their retirement by bolstering the Thrift Savings Plan cleared the Senate Committee on Governmental Affairs Wednesday.
The bill, H.R. 208, aims to bring the savings plan more in line with 401(k) plans offered by private companies by allowing new employees to roll over any savings accumulated as part of a retirement plan under their previous employer into the plan. Current law allows those transfers for 401(k) programs but not for the savings plan.
The legislation also would allow new and re-hired employees to join the savings plan and contribute funds as soon as they begin work, eliminating the current six to twelve month wait.
Bill supporters cite an increasing insecurity among federal employees about their retirement, in part because of the downsizing that has occurred in recent years. They also note that about one-half of all heads-of-households in their late 50s have less than $10,000 in net financial assets.
When the bill worked its way through the House last year, House Civil Service Subcommittee Chairman Joe Scarborough, R-Fla., called the measure "noncontroversial" and noted that the President's fiscal year 2000 budget contained a similar proposal. Past versions of the same measure, he said, had twice passed muster with congressional committees, but they included features that made them more costly and did not ultimately get enacted.
The House bill includes a provision requiring federal agencies to provide offsets within their budgets to compensate for the decrease in tax revenue that will result from their employees taking advantage of the bill's new investment opportunities. But the bill also prohibits agencies from dipping into salary and benefits accounts to pay for the costs of the program.
The Senate committee agreed by voice vote to an amendment by Sen. Daniel Akaka, D-Hawaii, who sought to resolve problems involving refunds of retirement contributions, especially during divorce proceedings. Under current law, an individual in the middle of divorce proceedings can withdraw his or her retirement contributions and effectively terminate any right to an annuity based on service.
"State courts often do not realize that merely awarding a survivor annuity or a portion of an employee's annuity, without also issuing a specific order barring payment of a refund, will not prevent payment of a refund that will terminate those annuity rights," Akaka said in a prepared statement.
His amendment would block payment of a lump-sum refund if the Office of Personnel Management has received a notice that a court order bars payment of the refund in order to preserve the court's ability to award retirement benefits to the former spouse, or if payment of the refund ends any entitlement to the benefits.