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Pay & Benefits

Pushing a pay raise

A 4.6 percent average federal pay raise is looking more and more likely. Plus, bills on the Hill, IRAs and smart TSP planning.

Brian Friel

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Brian Friel
Brian Friel
A Pay and Benefits Watch reader wants to know if there's any push to increase the $2,000 annual limit on contributions to individual retirement accounts. Indeed there is. , the Comprehensive Retirement Security and Pension Reform Act, would increase the annual IRA limit to $3,000 this year, $4,000 in 2002 and $5,000 in 2003 and thereafter. The bill passed the House during the 106th Congress, but the Senate didn't approve the legislation. In the House this year, 286 of the 435 members have co-sponsored the bill, which would also increase the annual Internal Revenue Code contribution limit to 401(k) plans--and the federal Thrift Savings Plan--to $15,000 by 2006. The current Internal Revenue Code limit is $10,500. In May, the percentage limit on annual TSP contributions is rising from 10 percent to 11 percent of pay for Federal Employees Retirement System enrollees and from 5 percent to 6 percent for Civil Service Retirement System enrollees. The limits will go up 1 percentage point each year until the percentage limits disappear completely in 2006. With the gradual increase in the percentage limits on TSP contributions and the proposed increase in the Internal Revenue Code on contributions, federal executives and managers in the Federal Employees Retirement System need to remember a key TSP investment strategy: Spread out your contributions. Agency matching contributions apply to the first 5 percent of pay each pay period that you contribute to your TSP account. If you don't spread out your contributions, you could hit either the percentage limit or the Internal Revenue limit before the end of the year, missing out on matching contributions during the last pay periods of the year. To make sure that doesn't happen, just divide the maximum amount you can contribute by 26 (the number of pay periods in a year). The Internal Revenue limit this year is $10,500. If you make less than $95,450 this year, figure out what 11 percent of your pay is and divide that by 26.

The Senate this week is considering a 2002 budget resolution that assumes federal workers will get an average 4.6 percent pay raise next year. Earlier this year, the Office of Management and Budget instructed agency budget crunchers to assume a 3.6 percent average pay raise for 2002, prompting concern among federal union leaders and some lawmakers that federal workers would not get the same raise as military personnel. The Bush budget proposed a 4.6 percent military pay raise. In 17 of the last 20 years, military personnel and civilians have received roughly the same pay raise (civilian pay raises vary by location). Last week, the House passed a budget resolution that calls for military-civilian pay parity, with a 4.6 percent raise for all. Senate Budget Committee Chairman Pete Domenici, R-N.M., on Monday introduced a budget resolution based on President Bush's proposed budget. According to a Budget Committee summary of the resolution, "The President's proposal assumes that, within the funds made available to federal agencies, the historic pay parity between federal civilian and military employees will be maintained. The Domenici [resolution] assumes the President's proposed 4.6 percent pay raise for military personnel will be similarly provided to all federal workers next year." However, in its initial budget blueprint, the Bush administration gave no indication whether it supports pay parity . The administration will issue a detailed budget plan next week that will include an official endorsement of a pay raise figure for federal workers. Bills on the Hill Here's a round-up of federal pay and benefits legislation introduced in Congress over the past week.

  • H.R. 1307, under which federal workers would only have to pay an average of 20 percent of their health insurance premiums. The current average is 28 percent. Uncle Sam covers the rest of the premiums. Rep. Steny Hoyer, D-Md., introduced the bill.
  • H.R. 1262, a bill that would guarantee federal wage grade workers an annual pay raise and lift the cap on blue-collar pay increases.
  • H.R. 1289, a bill that would prevent the Veterans Affairs Department from forcing nurses to work mandatory overtime.
Bigger IRAsH.R. 10TSP Contribution Tip

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