TSP limits lifted

The tax cut bill that Congress approved last weekend includes a provision that will allow federal workers to put more money into their Thrift Savings Plan accounts each year. The current annual limit on TSP contributions is $10,500. Under the tax bill, the limit will rise to $11,000 in 2002, $12,000 in 2003, $13,000 in 2004, $14,000 in 2005 and $15,000 in 2006. The rise in the dollar limit will coincide with the phase-out of the percentage limits on contributions. Under legislation passed last year, employees in the Federal Employees Retirement System can now contribute 11 percent of their pay to the TSP, up to $10,500. Employees in the Civil Service Retirement System can contribute 6 percent of their pay. Those limits will rise 1 percent each year until 2006, when the percentage limits will be eliminated. Then, the only restriction will be the dollar limit of $15,000. TSP contributions are tax-deferred. The more employees contribute, the lower their taxes. For an in-depth look at deciding how much money to contribute to the TSP, see the April 21 Pay and Benefits Watch column, Understanding TSP contributions. Pay Parity Request Lawmakers are continuing their push for a higher pay raise for civilian employees next year, despite the Bush administration's commitment to a 3.6 percent average pay raise. Twenty-two members of the House and Senate, including Senate Minority Leader Tom Daschle, D-S.D. and Washington-area representatives, urged President Bush in a letter May 24 to support a 4.6 percent average raise instead. The lawmakers said military and civilian raises should be the same. Bush has proposed a 4.6 percent raise for the military. "The federal government must offer competitive pay and benefits to our nation's public servants-whether they serve in the armed services or civil service-in order to attract and retain qualified employees," the lawmakers' letter said. "As the appropriations process begins, we are writing to request that you support agency funding levels sufficient to guarantee pay parity between federal civilian and military employees." Last week, Office of Management and Budget Director Mitch Daniels said the administration is sticking to its recommendation of a 3.6 percent average raise. But Congress could force a 4.6 percent raise as part of an appropriations bill later this year. In a statement on Wednesday, Rep. Steny Hoyer, D-Md., said the Bush administration should provide a budget amendment to fund a higher raise. "The administration needs to not only support pay parity but to step forward with a funding source that is both reasonable and appropriate to achieve pay parity," Hoyer said. "We cannot finance this very well-deserved cost-of-living adjustment by cutting training, hiring or promotions." Pay Cap Fallout A bill that Rep. Tom Davis, R-Va., introduced earlier this month to raise caps on pay for members of the Senior Executive Service wouldn't help high-ranking employees on the General Schedule. The bill, H.R. 1824, would push the cap on executives' base pay from Level IV to Level III of the pay schedule for members of Congress and the Cabinet. But the pay cap on General Schedule pay, including locality pay, would remain at Level IV, as would the cap on General Schedule plus special law enforcement pay. Many high-ranking employees on the General Schedule take home less money each year than they earn on paper because of the caps. New Health Regs Coming Be on the lookout for a change to the Federal Employees Health Benefits Program. The Office of Personnel Management will soon be issuing regulations that will change the effective date for choices federal employees make during the annual open season for health insurance. Health insurance elections, such as switching plans, used to take effect on the first day of the first pay period of the new calendar year. Now elections will take effect on Jan. 1. In 2002, that first day of the first pay period will be Jan. 13 for most employees.