At a time when many private firms are cutting 401(k) plan benefits, federal and military personnel this year have more money to invest, more investment options and higher limits on how much they can invest tax-deferred.
With their investment track record, a new raise (4.77 percent for Washington-Baltimore feds and 4.6 percent for military personnel) and new higher investment limits, the amount federal-military personnel pump into their Thrift Savings Plan this year could increase $100 million or more.
Federal and military personnel will be able to invest an additional percentage point of salary (up to 8 percent and 12 percent of pay) this year, and the amount they can invest has gone from $10,500 last year to $11,000 this year.
Since new hires were allowed to immediately join the TSP last year (thanks to legislation by Rep. Constance A. Morella, Maryland Republican) more than 43,000 brand new employees have signed up for the TSP.
Financial planners almost universally recommend that anybody eligible for a 401(k) plan participate to the maximum extent for the tax break and to build a future nest egg. But before you decide where you want to go, you need to know where you are. For instance:
The open season, when people can join the Thrift Savings Plan, increase their contributions to the TSP or reallocate where future payroll deductions will go, ends Jan. 31. There will be another open season later this year, but why waste six months especially when the market may be “on sale.” The Jan. 31 shut-off date applies to military investors in the TSP too.
Beginning his year, the so-called “elective deferral limit,” the tax-deferred amount the Internal Revenue Service lets individuals put in their 401(k) plan annually, will increase $1,000 per year until it reaches $15,000. Last year, the limit was $10,500.
The amount employees under the Federal Employees Retirement System can invest this year in the TSP is an astonishing 12 percent, while the amount for those under the Civil Service Retirement System is now 7 percent.
Experts predict that TSP savings assuming you invest will provide about half the cash that feds in the Federal Employees Retirement System will have to spend in retirement.
Former federal workers because of their experience and security clearances make wonderful candidates for the 28,000 airport screener jobs that will soon be filled. With three large airports Ronald Reagan Washington National, Washington Dulles International and Baltimore-Washington International the Washington area needs lots of help.
Anyone interested in applying for a screener job (pay has yet to be set) should get in line. E-mail your name and address to firstname.lastname@example.org or call the toll-free number at 1-866/404-1227.
Wanted: More HMOs
By now you’ve noticed that your health insurance premiums probably went up this year. Much of that is because of the high cost of prescription drugs, the fact that more people are taking drugs and that the federal family (which unlike private health plans includes retirees for life) is getting older.
To help slow the rise in premiums, federal officials are looking for ways to encourage more health maintenance organizations to participate in the federal health program. About 130 have dropped out in the past four years. At one time, the Washington-Baltimore area offered feds and retirees more than a dozen HMO choices. Now, that’s down to about five. HMOs tend to attract younger, healthier workers leaving fee-for-service plans to cover retirees who have higher health bills. They hope more HMOs will come into the program and that more retirees will chose managed care.
Dental benefits/the mouth that roared
Inadequate dental benefits is the No. 1 complaint most federal workers have of their health plans. Even the best and most of them are HMOs pay only about half of all costs. Government officials would like to offer better benefits perhaps as part of an auxiliary plan but haven’t figured out exactly how to do it. They may find out quickly if a key member of the House or Senate (or his or her spouse or dependent child) is suddenly hit with staggering dental bills.