Roth 401(k) not TSP option

Uncle Sam will not offer employees an in-house Roth 401(k) plan — not because he is trying to save money, but because he can’t.

Congress authorized the popular Roth option within 401(k) plans starting this year. The Roth guarantees that after-tax money invested in the retirement fund will not be taxed, regardless of how big it grows.

Although the Roth would be a welcome addition to many employees, few companies have opted into the program because of the added cost and time it would take to administer it. That decision has angered many employees.

The Federal Retirement Thrift Investment Board, which handles the federal Thrift Savings Plan (TSP), has an even better excuse for not offering the in-house Roth option. Congress didn’t authorize it for the TSP. That could change, of course, but it would require special legislation.

New investment options

The amount of money that federal, postal and military investors can put into the TSP has gone up to $15,000 for those younger than 50, and to $20,000 for anyone 50 or older any time this year. The extra $5,000 permitted in pretax contributions is considered a catch-up for people for whom the 401(k) option came relatively late in their careers.

People who want to take advantage of the higher limits should be sure that they don’t lose matching agency contributions, worth up to 5 percent, by hitting their investment ceiling before the end of the year.

Last year, the TSP investment ceiling was lower and was limited to a percentage of salary. Now the ceiling has been raised and the percent-of-pay limit is gone.

Look for the armed services, in some cases, to begin giving matching contributions to selected members of the Army, Navy, Air Force and Marine Corps.

Congress OK’d the first-time match (effective in 2006) last year. But the program is limited in a way that strikes many longtime military people as unfair and unwise. The idea is that the matching contributions, which are the equivalent of a tax-deferred pay raise, initially will be limited to first-time military recruits who sign on to serve more than two years.

The Pentagon may decide to tweak the program, or ask Congress to broaden it, to help recruit and retain people with hard-to-find skills.

Scholarships anyone?

Federal and postal workers and their dependent children now can sign up for college scholarships for the 2006-07 school year. To be eligible for the Federal Employee Education & Assistance Fund, the fed must have at least three years of service. Dependents must be full-time students with a grade-point average of 3.0 or better.

For applications, send a postage-paid self-addressed standard-size envelope to FEEA Scholarships, Suite 200, 8441 W. Bowles Ave., Littleton, CO 80123-9501. If you do computers, you can download the scholarship information by going to www.feea.org/scholarships.html.

In a separate scholarship program, FEEA is sending, or has pledged to send, children of feds killed in the Oklahoma City attack to the school of their choice. Many have completed their education and others are just reaching college age. FEEA says students have gone to Ivy League schools as well as community colleges.

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