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FOR FEDERAL INVESTORS LIFE BEGINS AT 50 Fifty-something civil servants, who make up a large chunk of the federal workforce, would be able to put an extra $1,000 tax-deferred into their Thrift Savings Plans this year under bipartisan bills that have White House support. Under the plan, proposed by Congresswoman Constance Morella (R-Md.) and Senator Daniel Akaka (D-Hawaii) federal and postal investors who are age 50 or older would be able to put in an extra $1,000 this year, $2,000 next year and so on until 2006 when they could contribute $5,000 extra each year. The higher contributions would not be affected by the IRS rules that now limit individual contributions to all 401k type plans to $11,000. New hires also have a stake. The legislation would authorize the government to make matching contributions to the TSP plan immediately. Currently, there is a waiting period before the match of as much as 5 percent begins. The bad news is that the Morella-Akaka bills have only a handful of sponsors, most of them from the Washington area. But the good news is two fold: First, it would cover members of Congress and congressional staffers who also participate in the TSP, which is Uncle Sam's version of a 401k plan. And a lot of them are over 50. Second, because of a smart legislative move last year by Morella, the White House has no objection to allowing feds to make catch up payments. 401k plans can set their own rules, provided they remain within tax law and IRS guidelines. In the case of workers under the old Civil Service Retirement System, up to 7 percent of salary can be invested in the TSP. Those under the newer Federal Employees Retirement System can put in 12 percent, provided neither amount exceeds the maximum $11,000 contribution limit set by the IRS. But the Morella-Akaka bills would let feds over 50 make the higher catchup payments each year, even if they exceed the $11,000 limit. What both bills need now is more cosponsors and more grass-roots support in the form of letters to your representatives and senators. The Morella bill is H.R. 3340/H.R. 3345. The Akaka bill is S. 1821/1822. WHERE'S YOUR TSP INVESTMENT? As of January 31, federal postal investors had $50.089 billion in the C-fund (stock index); $40.971 billion in the G-fund (treasury securities); $8.393 billion in the F-fund (bonds); $1.099 billion in the S-fund (small and mid cap stock index) and $326 million in the I-fund that tracks an international stock index. RETIRE & LOSE MONEY The National Association of Retired Federal Employees hopes to convince thousands of younger, short-service feds that they should be NARFE members now. At one time NARFE, the largest of the federal/postal groups, restricted membership to retirees and still-working feds with 5 or more years service. Now it welcomes all feds. A NARFE recruiting brochure points out that working feds can pay their health premiums in pre-tax dollars, saving the average person about $424 per year in taxes. But it will require a change in federal law before that so-called "premium conversion" option is available to retirees. NARFE wants active duty feds to join now that the premium conversion savings will be available to them when they retire. For details on premium conversion click here.
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