Federal workers eager to take maximum advantage of the new tax-deferred thrift savings plan may have to wait until early next year to find out how much they can invest in 1988, or even whether they put in too much money this year.
Uncertainty over how much they can invest is a problem for U.S. workers who must decide by the end of this year whether to switch to the new pension plan, with its greater investment options, or stay in the old pension program, with its more generous civil service benefits.
Under current rules, employes can invest between 5 and 10 percent of their own salary (tax-deferred) in the new plan and get a matching tax-deferred contribution from the government of up to 5 percent. The federal thrift savings plan is considered one of the most generous tax-deferred plans in the country.
But amounts workers can invest are subject to Internal Revenue Service rules that could, unless Congress exempts the U.S. plan, reduce the amounts workers can set aside in tax-deferred savings.
The final sign-up for 1987 thrift savings plan deductions ends this month. The rate at which employes sign up and the amounts they invest could have a critical bearing on the future of the program.
If large numbers of lower-paid workers fail to invest or put in small amounts, it will affect the investment options of upper-income workers in that plan.
This is how it works:
The thrift savings plan is subject to the same so-called nondiscrimination rule as similar private sector plans. It limits the percentage of salary that workers making $50,000 per year or more can contribute to 2 percentage points above the average contribution for all lower-income workers in the plan. For example, if lower-income federal workers put in 3 percent this year on average, it would limit contributions of upper-income workers to 5 percent. That could force the government to give refunds, which would be taxable, to employes who had put in excessive amounts this year.
Worse than the tax problem, however, is the uncertainty facing U.S. workers who are trying to decide whether to go with the new pension plan -- which lets them contribute 10 percent with a 5 percent government match -- or to stay in the old plan, which limits their contribution to 5 percent. Employes must make a pension decision by Dec. 31, but that could be before the new contribution rate is known.
The nondiscrimination test also faces private sector workers each year. But most are accustomed to it because their plans have been around longer. Also, they do not have the same pension decision to make as U.S. workers.
Congress is considering exempting the federal thrift savings plan from the nondiscrimination rules and putting it under the more liberal guidelines covering plans for employes of some states and nonprofit groups. The government certainly qualifies under the latter.
There is a good chance Congress will exempt the thrift savings plan and protect the current contribution rate. It also would benefit members of Congress. But until it acts, U.S. workers are operating in the dark where their pension and investment options are concerned. Picking a Pension Plan
Fairfax County's cable TV network will present the Office of Personnel Management videotape that explains the differences between the old and new federal retirement plans.
Channel 61 plans to show the video today at 7 p.m., Thursday at 5 p.m., July 28 at 7:30 p.m. and July 29 at 8 p.m.