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Furloughs and your TSP account
Monday - 3/4/2013, 2:00am EST
What about the amount of money you are putting into the TSP each payday? Will furloughs impact that? Again, yes!
Most federal workers participate in the TSP, which many experts consider to be the best 401(k) plan in the world. It is an important option for workers under the old CSRS program and an essential investment for the majority of feds who are under the newer FERS plan, which offers a reduced civil service annuity but a more generous TSP option. When it was set up, planners estimated that TSP investments and earnings (along with the generous government match) would supply anywhere from one-third to one-half of the total income available to FERS retirees. That's a lot.
So what's the deal with the TSP and furloughs?
Under the worst-case scenario for an extended sequestration, Defense civilians face up to 22 days of furlough and IRS workers could be furloughed one day per week for anywhere from five to seven days. Some agencies say they will be able to avoid furloughs, others are still crunching the numbers and watching the political game of musical chairs in Washington.
Anybody and everybody who is furloughed, even if for only one day, takes a 20 percent pay hit for that week. In Defense's Dr. Strangelove plan, that would mean a significant pay cut for most of this year. Furloughs, when and if they come, probably wouldn't start until mid-April at the earliest. Agencies must give employees 30-days' notice, and agencies must negotiate the terms and timing of furloughs in some cases with unions that represent both union and nonunion workers in that bargaining unit.
Even the start date of the sequester is in question. With apologies to Cinderella, Republicans and Democrats who created sequestration and reset the March 1 deadline couldn't even agree on when March 1 started. The GOP said it was 12:01 am on March 1, whereas Democrats argued that it technically didn't begin until the following midnight. The Office of Management and Budget, not suprisingly, ruled for the White House.
Now to the TSP. Will the Federal Retirement Thrift Investment Board, the agency that runs the TSP, be subject to furloughs? Short answer, No!
The TSP, like several other federal agencies, is not funded with appropriated money. It is funded through (very small) administrative fees. So no furloughs.
What about the contributions that federal agencies make to the accounts of FERS employees? Those workers get an automatic 1 percent contribution even if they contribute nothing themselves. They can also get an additional 4 percent matching contribution. So what happens to those contributions if the participant is furloughed?
According to the board:
"If a TSP participant is furloughed, his or her employing agency will continue to make the automatic 1% contribution and any matching contributions. However, the 1% automatic contribution will be based on the actual salary received (lower due to the furlough), not the participant's regular salary. Likewise, the agency matching contributions will be based on the participant's actual contribution to the TSP, not their regular contribution level."
NEARLY USELESS FACTOID
Compiled by Jack Moore
Courtesy of Federal News Radio producer Sean McCalley:
Forrest's girlfriend in Forrest Gump is named Jenny, but most people don't know her last name. It's Curran, and it's never spoken throughout the entire movie. The only time her full name is revealed is on the envelopes Forrest used to mail news from Vietnam. Also, it's a popular trivia question used by wait staff at the Bubba Gump Shrimp Co.
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