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Officials with the federal government’s 401(k)-style retirement savings plan announced Wednesday that they are planning an initiative to make it easier for older federal employees to maximize contributions to their retirement.
Jim Courtney, director of communications and education for the Thrift Savings Plan, said at the monthly meeting of the Federal Retirement Thrift Investment Board, which administers the TSP, that staff members plan to simplify the system by which feds 50 and older can make catch-up contributions, called “spillover” contributions.
“The [Internal Revenue Service] sets limits for how much people can contribute to the TSP each year,” Courtney said. “This year it’s $19,000 for most, and for those 50 years old and older, they’re allowed to make an additional $6,000 in catch-up contributions."
Participants currently separate out their regular and catch-up contributions. "But almost a quarter of [Federal Employees Retirement System] participants making catch-up contributions are nowhere near reaching the normal contribution limit," Courtney said. "And in April 2018, we found that two-thirds of the 29,000 participants [eligible for catch-up contributions] would hit their [normal contribution limit] early without using catch-up contributions.”
Under the new system, which Courtney said will be in place by January 2021, participants eligible for catch-up contributions will be able to simply contribute one pot of money up to the higher annual limit.
“The way it works is contributions [over the normal limit] will just spill over into the catch-up contributions,” he said. “Matching contributions for FERS and [the Blended Retirement System] will continue until we reach 5 percent of someone’s salary—we’d no longer need to track these contributions separately.”
Also during the meeting, TSP spokeswoman Kim Weaver said the agency would oppose legislation under consideration by Congress that would ban the agency’s international (I) fund from investing in companies from “peer or near-peer competitor nations,” like China and Russia. Weaver said the bill (H.R. 2903), introduced by Rep. Jim Banks, R-Ind., is intended to preempt the agency’s planned move next year to an investment index that includes companies in developing nations and China and Russia.
“It is intended, and I’m quoting, ‘to force the [Federal Retirement Thrift Investment Board] to re-evaluate its choice of index funds for the I Fund,’ ” Weaver said. “I did have conversations with staff prior to its introduction, and what we’ve learned is that if the federal government, or an entity of the federal government, takes action against a foreign company, [the operator of the new investment index] would remove them from the investment index. We’ve provided that information to staff, but the bill is something that we’d likely oppose.”