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Federal Diary

Readers Challenge Wisdom of Using TSP as Model for Social Security Accounts

By Stephen Barr
Monday, January 10, 2005; Page B02

T he Diary's mailbag has been stuffed for two weeks by thoughtful readers who think the White House is mixing apples and oranges when it suggests that the Thrift Savings Plan could serve as a possible model for personal investment accounts in Social Security.

Numerous readers said the two programs are unrelated and that the TSP, which relies on federal payroll systems for its basic operation, cannot be replicated on a scale as large as Social Security. Others said a column about the plan failed to stress that the TSP is a voluntary savings program that supplements Social Security, a tax-based program.

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"The TSP is in addition to Social Security as well as a federal pension," Robert Watson wrote. "It is merely one part of a three-part retirement system. It was never meant as a substitute for Social Security."

Philip A. Robinson emphasized that "no Social Security funds are used in the TSP" and that federal workers covered by the Federal Employees Retirement System receive matching contributions from their agencies. "The example the president holds up is a darn good model. But what he and the administration and the people who support the 'privatizing' of Social Security are selling is a different package," he wrote.

Several readers, including Robert L. Nelson, cited a 2002 paper written by the TSP's first executive director, Francis X. Cavanaugh, that explains why it might be difficult to adapt the TSP model to the private sector. The paper, "Feasibility of Social Security Individual Accounts," was published by the AARP Public Policy Institute. AARP is opposing Bush's plan.

Cavanaugh's paper, for example, says that personal accounts in Social Security will cost more to manage than those in the TSP, in part because the TSP can rely on hundreds of federal agencies to administer payroll deductions and provide retirement planning and other services.

The paper also points out that TSP operates on a progressive fee system (usually 60 cents per $1,000 account balance) so that holders of the higher account balances absorb part of the cost of maintaining smaller accounts. Such a fee system would not work in Social Security because too many accounts would be small, the paper contends.

Social Security relies on the government to absorb inflation and market risks, while the TSP shifts those risks to individual investors, Cavanaugh writes. "Attempts to combine these two fundamentally different programs are like mating a bear with a bee -- somebody is going to get hurt," he concludes.

Davis Keeps Federal Oversight

House Republicans have reappointed Rep. Thomas M. Davis III (R-Va.) as chairman of the House Government Reform Committee, which oversees federal employee and retiree benefits.

In a statement, Davis promised to pursue a "good government, reform-focused agenda" that would help improve national security, streamline the government and root out waste, fraud and abuse. "We'll keep reminding ourselves: 'It's Reform, Stupid,' " Davis said.

The committee's agenda will include revamping the U.S. Postal Service, changing federal law enforcement pay, reorganizing the General Services Administration and the continued revising of federal acquisition policy, Davis said.

Farewells at IRS

There's been a round of farewells at the Internal Revenue Service's appeals offices in Washington. Eight employees with a combined service of 249 years retired in late November and early December.

They are: Brian Arnold, IRS appeals officer, with 27 years of federal service; Edward Wyrsch, an appeals officer with 36 years of service; Charles McFadden, director of finance, 35 years; JeanDavis Cichaski, program analyst in finance, 32 years; Mary Carroll, program analyst for tax policy and procedures, 30 years; Cheryl Revier, program analyst for tax policy and procedures, 33 years; Sandra Skelton, program analyst for tax policy and procedures, 25 years; and Cynthia Curtis, program analyst for business systems planning, 31 years.

Elsewhere in the agency:

Sandra A. Moody, senior operations adviser at the IRS, retired Jan. 3 after 31 years of federal service. She began her career as a revenue agent in Lakeland, Fla., and held several critical positions, including chief of the examination division.

Don Roberts, a senior public affairs specialist at the IRS, a master of the tax code who explained IRS regulations in plain English and was a keeper of institutional lore, retired Dec. 30 after 30 years of federal service.

E-mail: barrs@washpost.com

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