Morella to reintroduce TSP bill

Rep. Connie Morella, R-Md., will re-introduce a bill to allow federal employees to contribute more money to their Thrift Savings Plan accounts.

Morella's bill, the Thrift Savings Plan Enhancement Act, will include a provision that would allow all federal employees to contribute up to the IRS limit, which is $10,000 this year, to their TSP accounts. Under current rules, Federal Employees Retirement System enrollees can only contribute up to 10 percent of their pay to the TSP, the government's 401(k)-style investment program. Civil Service Retirement System employees can contribute only 5 percent of their pay.

Those percentage-based limits mean employees who make less than $100,000 cannot contribute up to the IRS limit. A FERS enrollee who makes $50,000 a year, for example, could only contribute $5,000 to his TSP account each year.

Morella introduced similar bills in the 104th and 105th Congresses. Last year, she described her proposal as "a sensible way to encourage federal employees to take personal responsibility and increase their saving for retirement."

The new bill would also allow federal employees to begin participating in the TSP immediately after being hired, rather than waiting a year, as current law requires. And the proposal would permit new federal employees to roll over money from their private sector 401(k) accounts to their TSP accounts.

The proposal to lift the contribution limit has met opposition in Congress because it could reduce tax revenues. All TSP contributions are tax-deferred.

According to estimates by Congress' Joint Committee on Taxation, the provision would have decreased tax revenues by $869 million from 1999 through 2002 if it had passed last year.

Bill Miller, Morella's chief of staff, said she will ask the committee to reassess its estimate.

"We think that's high," Miller said.

If opposition to the measure blocks passage of the Thrift Savings Plan Enhancement Act, Morella will push a bill including just the provisions lifting the one-year waiting period for TSP participation and allowing employees to roll their 401K accounts into the TSP, Miller said.