By Stephen Barr

Wednesday, January 21, 2004; Page B02

The Thrift Savings Plan is changing its loan program in an effort to discourage government employees and retirees from using it as a line of credit.

Starting July 1, the TSP will charge a $50 fee to cover the costs of processing and administering each new loan. Currently, about 500,000 participants have loans, but the overhead costs of the program are absorbed by TSP's 3.2 million participants.

Last year, in reviewing the loan program, TSP officials said the pattern of loan disbursements suggested that some participants were borrowing to essentially give themselves a line of credit while others were regularly taking out loans to pay college tuition.

Under the changes that take effect in July, TSP participants will be able to take out one general purpose loan and one residential loan. When paying off a loan, they will not be allowed to apply for another loan for 60 days.

Currently, TSP participants may hold two loans at the same time, and they may pay off a loan early and immediately request a new loan.

Like most private-sector 401(k) plans, the TSP offers loans as a way to encourage government employees to save for retirement. Workers are less reluctant to set aside retirement money if they know they have some access to their accounts when facing financial obligations or hardships.

Still, officials said, the number of loans being taken out has increased in recent months, and noted they that loans usually take up more processing time than other transactions. At the end of last year, TSP carried 934,563 loans, worth about $5.2 billion, on its balance sheet. Of the 500,000 participants who have loans, more than 40 percent hold two loans.

The rules for the loan program were among a series of changes discussed yesterday at a meeting of the Federal Retirement Thrift Investment Board, which oversees the TSP. The plan has been growing by about $1 billion a month in new contributions from participants and ended last year with about $129 billion in assets.

The board's chairman, Andrew M. Saul, and the board's executive director, Gary A. Amelio, have been reviewing ways to improve TSP service, hold down plan costs and better educate participants about saving for retirement.

Amelio said TSP appears likely to save several million dollars in printing and mailing costs because only 10 percent of participants have asked to receive paper financial statements. TSP announced in November that statements no longer would be automatically mailed because plan members can track changes in their accounts through the agency's Web site and print out statements whenever they need one.

TSP continues to upgrade its computers following the launch of a new record-keeping system last summer. Lawrence E. Stiffler, director of automated systems for the board, said a new $2 million mainframe has been installed at the National Finance Center in New Orleans and is on track to begin operating in early February.

The mainframe will allow TSP customer service representatives to call up account data faster when helping participants over the telephone and will speed up Web-based transactions for many users, he said.

Two Internal Revenue Service managers who designed IRS tax forms retired Jan. 2.

John Harris, head of the business forms and publications branch, retired after 34 years of federal service. He worked on excise tax forms and information returns -- such as forms W-2 and 1099 -- and was recognized for his outstanding work by the American Payroll Association with their Government Partner Award.

Michael Siegerist, head of the review section for the tax exempt and government entities and specialty business forms and publications branch, retired after 31 years. He spent most of his IRS career working on the tax forms for trusts, estates, gifts, and charities (such as Forms 1041, 706, 709 and 990) and was integral in simplifying the reporting burden for many charities.

Please join me at noon today for a discussion of federal employee and retiree issues on Federal Diary Live at www.washingtonpost.com.

E-mail: barrs@washpost.com.