Time is running out for federal employees to take advantage of two opportunities to change their benefits package.
One is the first-ever federal long term-care insurance program open season. The other is the biannual Thrift Savings Plan open season. Both open seasons end on Dec. 31.
Decisions you make during these open seasons will have repercussions on your retirement savings. Long-term care insurance can protect your assets from being depleted if and when you need nursing home care, home health care or other extended health care services not covered by traditional health insurance. Investments in the TSP will be the key component of retirement packages for federal workers hired after 1983, and a nice cushion for workers hired before 1984.
Congress established the federal long-term care insurance program in 2000. Long-term care insurance covers services in nursing homes and chronic or extended illnesses that are not covered by traditional health insurance. Under the federal program, the Office of Personnel Management negotiated discounted rates for federal employees and retirees, military personnel and retirees and many of their family members. Long-Term Care Partners of Portsmouth, N.H., is the contractor that runs the program. The company is a partnership between insurance giants Metropolitan Life of New York and John Hancock of Boston.
The cost of long-term care, such as nursing home stays, can wipe out a family's savings. Long-term care insurance can prevent that from happening. However, the premiums for long-term care insurance can be prohibitively expensive for low-income workers, who could probably rely on Medicaid and Medicare for long-term care anyway.
Federal employees and retirees can sign up for the federal long-term care insurance program through Dec. 31. The program's Web site, www.ltcfeds.com, is a good source of information, as is last week's Pay and Benefits Watch guest column by Catherine Breeden. You may find that the federal program is best for you, that an outside vendor works better, or that going without long-term care insurance is your best bet.
Meanwhile, federal employees also have an opportunity to change the amount of money they put into their Thrift Savings Plan accounts from each paycheck, or start participating in the TSP for the first time. The TSP is the government's 401k-style retirement savings program, allowing federal workers to invest pre-tax money in stocks, bonds and government securities.
In 2002, the limit on TSP contributions was 12 percent per paycheck for employees under the Federal Employees Retirement System and 7 percent per paycheck for employees under the Civil Service Retirement System. Annual contributions could not exceed $11,000.
In 2003, the limits are going up. The per-paycheck limit for employees under the Federal Employees Retirement System will be 13 percent. The per-paycheck limit for employees under the Civil Service Retirement System will be 8 percent. The annual limit will be $12,000.
Federal workers can submit paycheck deduction changes to their payroll offices until Dec. 31. Previous TSP winter open seasons ran until Jan. 31, but the TSP board changed the dates of the open season this year.
The next TSP open season will run from April 15 to June 30. By mid-year 2003, federal employees age 50 and older will be able to contribute an additional $2,000 per year to their TSP accounts under a bill signed by President Bush last month. Before employees can take advantage of the so-called catch-up contributions, the TSP board has to develop procedures for them and agencies have to make changes to their payroll systems to accommodate the new contributions.