Lawmakers to unveil leave investment bill for TSP

Lawmakers plan to introduce a bipartisan bill this week that would allow federal employees to invest the cash value of their unused annual leave in their Thrift Savings Plan accounts, retirement program staff said on Monday.

Rep. Stephen Lynch, D-Mass., chairman of the House Oversight and Government Reform Subcommittee on the Federal Workforce, and Rep. Jason Chaffetz, R-Utah, will introduce the legislation, Thomas Trabucco, director of external affairs for the TSP, said during the Federal Retirement Thrift Investment Board's monthly meeting.

The Internal Revenue Service moved in September 2009 to allow private sector employers to deposit the value of their employees' unused leave in 401(k) accounts. Contributions from annual leave would not count as a separate category of retirement savings and would be subject to the annual limits on such contributions, which are $16,500 for employees younger than 50 and $22,000 for those who are 50 or older.

In November Lynch began discussing publicly the possibility of extending a similar benefit to federal employees, and Trabucco said he hoped Chaffetz's participation gave the legislation a chance of advancing in the House, which has been strongly split along partisan lines. Senators are "waiting to see what the House does on this one," rather than introducing a companion bill, according to Trabucco.

Matt Biggs, legislative director for the International Federation of Professional and Technical Engineers, said his union strongly backed the bill.

"It's another benefit that will help to enhance retirement savings for federal workers without costing taxpayers a dime," he said.

Carol Bonosaro, president of the Senior Executives Association, said her organization's representative to the Employee Thrift Advisory Council, which gives employee groups a voice on TSP policy, had recommended the change to members of Congress.

The measure comes as the TSP is preparing to implement a significant upgrade to its Web site, and to begin automatically enrolling new federal employees. Trabucco said the TSP was hiring employees as a response to general growth in plan participation, but was not bringing on new staff specifically in a response to automatic enrollment. Its redesigned Web site will debut in May, and in August, agencies will start automatically depositing 3 percent of new employees' paychecks into their retirement accounts.

TSP had its highest balance ever at the end of February, with $246.3 billion in investments, Trabucco noted. That figure represents a $4.2 billion increase from the end of January, driven by strong returns in February.

Tracey Ray, TSP's chief investment officer, said so far "March is even better than February" in terms of plan performance. The S Fund, which invests in small and midsize companies and tracks the Dow Jones Wilshire 4500 Index, is up 6.7 percent for the month, she said. And while the international (I) fund has suffered because budget crises in Greece, Spain and Portugal have hurt the European stocks that make up two-thirds of its balance, it has grown more than 5 percent so far in March. This compensates for losses in January and February, Ray said.

Overall participation rates in the TSP stayed steady from January to February, at 82.4 percent of Federal Employees Retirement System workers. The number of active-duty military enrollees rose slightly, from 37.6 percent in January to 38.2 percent in February.

CORRECTION: The original version of this story had the wrong annual limit on retirement contributions for people age 50 and older.