Sen. Marco Rubio (R-Fla.) on Tuesday called for opening the federal Thrift Savings Plan to all Americans as part of a broad proposal for restructuring retirement benefits and helping workers prepare for their golden years.
The TSP is a 401(k)-style savings plan available to federal employees and military personnel. Participants invest part of their pre-tax income into the program, and the government matches that amount — the matching does not apply to members of the military.
Rubio, widely considered to be a top contender for the 2016 Republican presidential nomination if he decides to run, also called for changes to Social Security and Medicare, saying the programs are in danger of becoming insolvent by the time he reaches retirement age.
We’ll examine those proposals later in this article, but first let’s look at why the TSP might interest Americans who work in the private sector.
The Thrift Savings Plan
Financial experts cite the TSP as a model for 401(k) plans because of its simplicity, low fees and diverse investment options, among other benefits. Rubio said it is unfair that all Americans can’t participate in the program.
“The twisted irony is that members of Congress, who are employees of the citizens of the United States, have access to a superior savings plan, while many of their employers, the American people, are often left with access to no plan at all,” he said during a National Press Club event this month.
A spokeswoman for the TSP investment board said that granting access to non-federal workers would diminish the focus on existing participants, according to a Government Executive article. She also said that obtaining data from millions of private employers would “require a completely different set of operational capabilities.”
It’s worth noting that federal agencies perform much of TSP’s administrative work, meaning taxpayers are subsidizing the costs of the program to a large extent. Under Rubio’s plan, the government would pick up a lot more of that taxpayer-funded work, or else the TSP would have to raise its fees — something federal employees would surely oppose.
Rubio proposed raising the retirement age, capping benefits for the wealthiest recipients and waiving payroll taxes for older employees who continue to work after they qualify for payments.
The left-leaning Alliance for Retired Americans accused the freshman senator of trying to dismantle Social Security, saying in a statement on Tuesday that his plan “shows how out of touch he is with the needs of current and future retirees.”
Rubio proposed a “premium-support” plan that would allow Americans to choose either private insurance plans or enroll in the traditional Medicare program. The government would contribute a set amount toward their premiums, and beneficiaries would have to cover the difference on their own if their plans cost more — or they would receive a refund if the costs are lower.
Rep. Paul Ryan (R-Wisc.) has pitched a nearly identical plan for the past several years, but Democrats have opposed the idea, saying it amounts to a voucher system that would limit health coverage.
Federal workers do not rely solely on the TSP for retirement savings. They also receive defined benefits through one of two other plans, either the Civil Service Retirement System or the Federal Employees Retirement System, depending upon when they were hired. Those who participate in the latter program receive Social Security benefits upon retirement.
Similar to Rubio’s plan for the TSP, Rep. Darrell Issa (R-Calif.) last year proposed a bill that would have opened federal-employee health coverage to all Americans, saying the measure would help address some of the nation’s healthcare challenges.
The proposal picked up bipartisan support from Reps. William Lacy Clay (D-Mo.) and Mick Mulvaney (R-S.C.), who cosponsored the legislation, but the bill never came up for a vote in the House.
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