Lawmakers continue to discuss turning unused sick leave into TSP dollars

Lawmakers in the House are talking about your TSP, and whether you would be allowed to make contributions from the value of your unused sick leave.

Tom Trabucco is Director of External Affairs for the Federal Retirement Thrift Investment Board and said this proposal stemmed from President Obama's radio address this past Sept. 5.

"His radio address for Labor Day weekend talked about a number of improvements that he'd like to see made for working people in the country -- and of of them is -- and I quote -- 'We'll make it possible for employees to pu payments of unused vacation and sick days into their retirement plan if they wish. Right now, most workers don't have that option.'"

Trabucco said he was just as surprised as anyone to hear about the proposal -- or the barrage of phone calls from the unions that followed.

"They did call and they said -- hey, Tom, the President said this. What does that mean? And I said -- well, we'll look into it. When we looked into it, we found out that what it meant in application was that the Internal Revenue Service had released two revenue rulings -- Revenue Ruling 2009-31 and Revenue Ruling 2009-32. . . . What they essentially said was that if you have a leave plan that requires you to either take leave or cash at different periods . . . The IRS likes the idea of allowing the value of that to also be put into your 401(k) plan at work. The second ruling dealt with terminal leave. When you separate or retire from an employer, if you get a lump sum for the value of any unused leave, you'd be able to put that into your retirement plan, as well."

He said he and other members of the Board were recently on the Hill to talk about the new IRS regulations, as were the unions, who all endorsed the idea of allowing those types of contributions.

Just because the regulations have been put into place, though, doesn't mean TSP participants will see changes right away.

Trabucco said Congress would need to give its approval and the TSP Board would need to see a precise outline of how the program would work.

"As we took a look at it, there is really one type of leave right now that would fit right down the pipe of these IRS rulings, and that's when you separate from a federal service, any unused annual leave you have left over, you get paid cash for. . . . So that is a definite possibility."

He added that TSP participants will have to stay tuned in terms of when the changes will occur.

For more information from FederalNewsRadio's Senior Correspondent Mike Causey on the possibility of rolling over unused sick leave into the TSP and how that would work, click here.

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