- The Washington Times - Monday, March 7, 2005

Both opponents and supporters of President Bush’s proposal to privatize a portion of the Social Security system are citing Uncle Sam’s $151 billion in-house 401(k) plan as proof that they are right.

Backers of the White House proposal say the successful federal Thrift Savings Plan shows that allowing people to invest part of their Social Security contributions in the stock market is a great way to generate more retirement income.

The TSP is expected to provide one-third to one-half the retirement income for current federal workers and a big chunk of the after-retirement income available to military investors.

Proponents argue that it is hypocritical for lawmakers to deny Americans the opportunity most congressional members and staffers are availing, including a failure-proof government fund.

This being Washington, both sides often use the same arguments and data to prove their point.

Opponents of the Bush plan say it is inaccurate to compare the TSP to the proposal because of the scale. Something that works for few won’t necessarily work for many.

They also say the cost of operating a partially privatized Social Security system, specifically the administrative fees that brokers would get to handle the investments, is a ploy to make Wall Street richer at the expense of investors who could end up without enough to retire.

The Web site www.factcheck.org dubbed as false assertions that Wall Street will get rich off the plan. The report says securities firms got only 16 cents for every $10,000 in worker accounts they handled — a fact federal officials confirmed.

Federal officials also said TSP participants pay far less in administrative fees than even cut-rate fund managers offer in the private sector.

Some feds fear glowing talk about the TSP plan will lead to some kind of political demand that it be cut back. Short answer: No way. Congress isn’t about to kill or reign in the golden goose it, too, enjoys.

Retire and pay more

Most federal and postal workers pay their sometimes hefty health insurance premium with pretax dollars. That can cut their federal tax bill anywhere from $250 to $1,000 per year. But when the feds retire, and take an income cut of anywhere from 20 percent to 45 percent, they lose the “premium conversion” perk.

But federal retirees would be allowed to pay their health care premiums with pretax dollars under legislation reintroduced by Rep. Thomas M. Davis III, Virginia Republican. The bill has many co-sponsors, meaning that if it comes up for a vote, it will pass the House.

The trick is to get the bill, which has been around for several years, past the congressional traffic cops — the House Ways and Means Committee and the Senate Finance Committee — so it can come up for a vote.

Social Security check eater

Bills that would eliminate the “windfall” and “offset” formulas for people retiring under the old Civil Service Retirement System program have been reintroduced. They also have lots of co-sponsors.

The windfall formula can cut the Social Security benefit due a federal CSRS retiree by $315 per month. The offset formula can eliminate the retirees’ Social Security spousal or survivor benefit.

Like the premium conversion bill, however, everybody favors the repeal of offset and windfall except the leaders of the House and Senate tax-writing committees. They fear that giving federal retirees the tax break, and adding to their Social Security checks, would break the bank. Until that logjam breaks — and there is no sign it will this year — the proposed changes will remain a dream, not a reality.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected].

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