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TSP? Maybe ... FERS? No!
Thursday - 5/15/2014, 2:00am EDT
Federal News Radio carried the correct story on Rubio's proposal yesterday
But I missed the boat.
I ruined part of some people's day on Wednesday when I said that Rubio, one of the front-runners for the 2016 GOP race for the nomination, would propose opening up the federal retirement program to nonfederal workers. I got an advanced peek at the proposal, but I peeked at the wrong part.
Rubio isn't advocating opening the FERS program to nonfeds. What he apparently does want is to give nonfederal workers the option of participating in the federal Thrift Savings Plan. The TSP is Uncle Sam's in-house 401(k) plan. It is now limited to active and retired federal and military personnel. People who leave the government or military for other jobs can keep their TSP accounts, but they cannot add to them.
David Snell, director of retirement benefits for NARFE, said Rubio's plan "would probably be a lot like President Obama's proposed myIRA, in that workers would be able to contribute to a federally sponsored/backed 401(k) type retirement plan. But Rubio's plan allows all workers to specifically invest in the federal TSP that was established for federal workers."
Snell said the Rubio plan does not provide for a basic FERS-like annuity. Nonfederal workers "would still have to contribute to Social Security for monthly retirement benefits at retirement," he said.
The majority of current participants, workers under the FERS retirement plan, get an automatic 1 percent government contribution to their accounts. Those who contribute at least 5 percent toward their accounts get matching contributions from the government — dollar-for-dollar on the first 3 percent and 50 cents on the dollar up until 5 percent.
The FERS program was set up in the 1980s to replace the old Civil Service Retirement System. CSRS retirees get a defined benefit annuity that is more generous than the FERS plan that replaced it. But they don't get any matching contributions to their TSP accounts, and they don't qualify for Social Security based on their federal service.
The original plan for FERS would have eliminated any federal annuity and based retiree benefits on Social Security and investments in the TSP. That was considered too radical at the time, so a reduced federal (FERS) benefit was included. Since that time, many private-sector companies have dropped defined benefit plans for employees, instead offering them 401(k) investment options. Many companies do not match employee contributions at any level.
Here's what David A., a Baltimore-based fed, has to say on the subject:
"We are moving, as a nation, to retirement packages of Social Security and what people can stuff into the crapshoot known as the stock market. It is not a pretty picture. If the politicians were thoughtful, they would be championing defined- benefit packages. Fat chance."
NEARLY USELESS FACTOID
Compiled by Jack Moore
The castle that inspired Bram Stoker to write Dracula is on the market. The Bran Castle — as it's officially known — is located near Brasov, Romania and is currently owned by the Hapsburg royal family. The castle, which has 57 rooms but apparently no bathrooms, is Eastern Europe's biggest tourist attraction.
(Source: UPI Odd News)
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