- The Washington Times - Tuesday, January 22, 2002

Uncle Sam's in-house 401(k) plan the Thrift Savings Plan has climbed back over the $100 billion value mark, and experts say its federal and postal investors are protected from the Enron meltdown and life's savings losses experienced by some of the energy company's employees.
TSP watchers say that Congress designed the TSP so that the mistakes made by Enron employees of investing too much money in company stock can't happen to federal and postal investors. That's because the "company stock" in the TSP takes the form of special U.S. Treasury securities not available to the general public.
The securities make up the G-fund, which is backed by the U.S. government and never has a bad day.
Despite the impacts of the terrorist attacks, the jittery stock market and the Enron meltdown, the plan as of Dec. 31 surpassed the billion-dollar mark by more than $500 million thanks to a slight rebound of the stock market and three-quarters of a billion dollars invested by participants.
Many financial planners believe that the TSP will provide workers retiring 10, 20 or 30 years from now with at least half of their retirement income. The rest will come from Social Security and a civil service annuity. Put another way, government workers who don't invest in the TSP (and at least take advantage of the 5 percent government match) will have to live on half the money that their investor colleagues will have.
Most of the money workers invest via regular payroll contributions goes into the higher-risk/higher-reward C-fund. It tracks the S&P; 500, which is invested in the nation's 500 largest companies.
Experts say the bankruptcy of Enron, the giant Texas-based energy company, will have little impact on TSP investors. Enron is one of the companies in the 500, but its losses are only a small percentage of the value of the total index.
When and if Congress decides to rewrite 401(k) plan rules, to limit the amount of company stock (or the amount employees can purchase) in company plans, it should make the TSP its model.

Social security attack
Each year more than 30,000 federal retirees (and former schoolteachers, cops and local government employees) feel the bite of one of two little-known laws.
One law, the so-called Windfall Elimination Provision, reduces their monthly Social Security benefit by as much as $270 per month. They are hit by a reduction unless (like most other American workers) they paid into Social Security for a full (30-year) career.
The other law, the Government Pension Offset law, reduces and, in fact, usually eliminates the spousal or survivor benefit that someone who gets a public pension (from work not covered by Social Security) expects to receive based on their private-sector spouse's earnings record under Social Security.
Congress is considering several bills that would modify both Offset and Windfall formulas to benefit people with low Social Security and low civil-service benefits.
Other bills which are considered unrealistic because of cost would wipe out Offset and Windfall. Both were originally passed when Congress discovered some middle- and higher-income federal workers were collecting maximum civil service annuities based on their high federal salaries, and the highest level of Social Security benefits because they had low earnings, or short-service under Social Security-covered employment.
Backers of modifying Offset and Windfall say that situation has been corrected and the laws now serve only to punish lower-income (mostly women) federal and public retirees.
For the status of the Windfall and Offset legislation, and to see who is and isn't co-sponsoring it, click on www.narfe.org.

Deflation and retirees
The annuities of government retirees, military retirees and Social Security recipients are indexed to inflation. That's why they go up sometimes a lot, sometimes not much each January. This month, for example, they rose 2.6 percent while federal pay (which is linked to local wage conditions and politics) rose 4.77 percent in the Washington area.
Since annuities were fixed to a cost of living adjustment (COLA) formula they have gone steadily upward. During times of high inflation, they often exceeded federal pay raises.
But now that the nation is into deflation prices have fallen in each of the last three months some retirees are afraid annuities will drop too. The National Association of Retired Federal Employees has advised members that under current law that won't happen.
Laws can be changed, but feds should be consoled by the fact that former members of Congress and their influential staffers also get federal annuities and look forward to ever-higher COLAs.


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