- The Washington Times - Monday, May 24, 2004

Uncle Sam’s in-house 401(k) plan, which many consider the best deal in the business, is about to get even better.

Congress, which runs and invests in the Thrift Savings Plan, is working on fast-track legislation that will let workers increase or decrease their contributions anytime, instead of being limited to two open seasons each year.

The move would help investors who get in a financial bind and need extra cash, as well as employees who suddenly have more money — perhaps they have paid off a car or credit card — and can afford to invest more and take advantage of a higher government matching contribution.

The TSP has a loan feature, allowing employees to borrow from and repay themselves, that many other 401(k) plans don’t offer.

It also charges some of the lowest administrative fees, at 70 cents per $1,000 invested, beating what analysts consider a bargain, Vanguard’s 500 Index fund at $1.80 per $1,000. Financial planners estimate the savings from low administrative costs could give TSP participants an additional $20,000 to invest.

So, at a time when many private companies are scaling back 401(k) programs, such as eliminating matching funds, the House is moving the change-anytime provision and the Senate is expected to consider it shortly.

By the by, the TSP offers the G Fund that is made up of securities guaranteed by the Treasury that are not available to other investors, and allows the majority of feds to get a 5 percent match from the government and 9 percent from those under the old federal retirement program and military personnel.


The thought of getting a $25,000 payment to retire or take early retirement intrigues many feds. This year, buyouts are easier for agencies to offer and afford. Most are making surprise offers and giving workers only a short window — sometimes less than two weeks — to decide.

But would-be buyout takers should be aware that deductions they expect — and some they don’t anticipate — can reduce their take-home payment to $15,000 or $16,000 in some cases, and to zero in others.

Many previous buyout takers whose wages were subject to garnishment or who have alimony or child-support obligations discovered, too late, that after all the deductions what they got was a check made up exclusively of zeroes.

If you think a buyout offer may come your way, then check with a financial planner and a lawyer before you sign on the dotted line.

Tougher loans

The ability to borrow from their 401(k) account, and to repay themselves over time, is a perk enjoyed by federal Thrift Savings Plan investors.

Most companies don’t allow it because of the cost of administering the loans and to protect investors’ balances.

Beginning in July, the loan program will get a little less liberal. The TSP will charge $50 for each new loan and no longer will permit two general purpose loans at the same time. It has advised investors that its a long-range retirement investment fund “not a checking or savings account.” Although this will irk many feds, and be a hardship to some, the TSP is simply acting more and more like a private-sector 401(k) plan.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or mcausey@federalnewsradio.com.

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