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Roth Delays in Perspective

At least three-fifths of federal workers won’t be able to enroll on the May 7 launch date for the new TSP option.

Many federal employees will have to wait a little longer to begin investing in the Thrift Savings Plan’s new Roth 401(k) option. The Defense Finance and Accounting Service, which administers payroll services to several agencies, including the White House, will not be ready to offer employees the added retirement investment option by May 7, the date of the official launch, as we have reported. A Washington Post report put the hold-up into perspective, noting, “at least three-fifths of federal workers” will face delays.

Officials cited complicated and differing pay systems as reasons for the delay.

The Roth offering, which the Federal Retirement Thrift Investment Board has been working on rolling out for a while, is similar to the one available to private sector employees. It will allow federal employees to invest money that’s already been taxed so it cannot be taxed again upon withdrawal, unlike a traditional TSP investment. The board, which oversees the TSP, said last week that not all federal agencies have completed the transition required to implement the Roth option and some would need additional time after May 7.

The benefit will not be available to civilian Defense Department employees and service members until summer or early fall.

The Roth option is a game-changer for younger federal employees in particular, TSP officials believe. It also could be a draw for young service members, who often receive annual allowances of $20,000 to $25,000 and would be better off being taxed on those earnings than their presumably higher income at the time they retire.

Feds can contribute up to $17,000 to the traditional TSP and the Roth option combined 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. Employees 50 and older can contribute an additional $5,500.

Life Insurance Changes

Some civilian employees deployed to Iraq will see changes to their life insurance coverage, according to the Office of Personnel Management.

Employees who chose Federal Employees’ Group Life Insurance Basic and/or Optional insurance, who were notified of deployment to Iraq before Jan. 1 and who were deployed after that date cannot retain their current elected coverage, the OPM memo stated. Those who picked FEGLI Basic and/or Optional insurance and were notified of deployment to Iraq before Jan. 1 and were deployed prior to that date are allowed to keep their elected coverage, according to the guidance.

The end of contingency operations in Iraq, effective Dec. 31, 2011, prompted the change. The 2009 National Defense Authorization Act expanded FEGLI election opportunities for civilian employees deployed to Iraq in support of a contingency operation. The changes were effective Jan. 1.

In addition, employees notified of deployment, but who requested an election after Jan. 1 are not eligible to enroll in FEGLI coverage, even if they filed the request within 60 days after receiving the notice of deployment, the guidance said.

Training Days

Federally Employed Women is holding its 43rd national training program July 16 through July 20 in Detroit. This year’s theme is Wheels of Change Keep on Moving. Click here for registration and cost information.

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