TSP to Increase Default Contributions, and More

Officials at the federal government’s 401(k)-style retirement savings program on Wednesday issued a final rule increasing the default contribution rate of new federal employees and military service members.

Beginning Oct. 1, when people are hired to become federal employees, their contribution rate into their Thrift Savings Plan accounts will be 5%, an increase from the current 3% and automatically setting employees up to receive the maximum contribution from agencies. And starting Jan. 1, the same will be true for new military service members in the blended retirement system.

Additionally, the TSP implemented a tweak to how it calculates installment payments based on life expectancy each year, the program will recalculate the amount of each installment payment on the first payment date of a given year. That change is effective immediately.

The U.S. Postal Service came to an agreement with the National Association of Letter Carriers earlier this month on how the agency will extend paid annual leave next year, to help accommodate the fact that some employees are unable to take time off due to the coronavirus and USPS workloads.

According to the deal, postal workers will be able to carry over up to 520 hours of annual leave from this year to 2021. Ordinarily, employees who are members of a bargaining unit can only carry over between 104 hours and 208 hours of annual leave from one year to the next, depending on their tenure.

The decision mirrors actions taken elsewhere in the federal government. Typically, non-postal federal workers may only carry over up to 30 days of annual leave from one year to the next, but because of the COVID-19 pandemic, the Office of Personnel Management waived that cap for employees who are unable to take leave because of their work responding to the outbreak.

Back at the TSP, officials on Monday approved the agency’s fiscal 2021 annual budget of $498 million, a marked increase over 2020’s $386 million budget. Executives at the agency, which is funded through participant fees, attributed the vast majority of the increase to the transition to a new vendor for recordkeeping services.

TSP Executive Director Ravindra Deo said that the new recordkeeping contract, which will take two years to fully implement, will provide a number of needed upgrades for the agency, both on the back end and in adding new features for participants, like a virtual assistant, the ability to accept electronic signatures, and a mobile app.

The agency anticipates that fiscal 2022 also will feature a higher-than-normal budget for the agency, but once the transition to the new vendor is complete by the beginning of fiscal 2023, the budget—and user fees—will fall again. Officials projected that the 2023 budget will fall to $416 million, which is in line the budget growth of recent years, and would actually mark a decrease in the fees per participant from $64 this year to $61 in 2023.