Money invested this month in the federal employes thrift savings plan will earn 9 percent interest, according to the Federal Retirement Thrift Investment Board that manages the six-month-old tax-deferred fund. The fund, made up of employe and government contributions, is now worth $627 million and growing at the rate of almost $5 million a day. Nearly 1 million of the government's 2.8 million employes are in the plan.
The thrift savings plan is part of the new Federal Employees Retirement System. But it is open to old and new federal workers, from top political appointees to clerks.
Although the federal thrift plan is identical to tax-deferred thrift savings plans, called 401(k) plans, in the private sector, analysts say the federal program is more generous than most because of the high percentage of salary that workers may invest, and the partially matching contributions from the government.
All money invested in the fund this year goes into a so-called G-Fund made up of guaranteed Treasury securities. The interest rate paid changes monthly. In August the fund was paying 8 3/4 percent; in July the interest rate was 8 1/2 percent, and in June it was 8 5/8 percent.
Employes who are covered by the new FERS pension system (that includes nearly everyone hired since the start of 1984, plus workers who convert from the old retirement system) can invest up to 10 percent of pay, or $7,000 of their own this year. Those who invest 5 percent or more also get a tax-deferred 5 percent matching contribution from the government. Even those workers under FERS who do not contribute anything themselves have accounts and get a 1 percent contribution each payday from the government.
Federal workers who remain under the old Civil Service Retirement System can put 5 percent of their pay into the tax-deferred savings plan. However, they get no matching government contribution unless they switch to FERS during the open enrollment period that will end Dec. 31. Although a large number of workers in the old pension plan have joined the thrift savings program, fewer than 2 percent so far have converted to the new retirement system.
As of last week, 35.8 percent of the 605,029 workers hired since the end of 1983 (who are automatically covered by FERS) were contributing their own money to the savings plan via payroll deduction.
The savings plan participation rate for new workers at the U.S. Postal Service was 35 percent. At the White House, it was 19.6 percent; Veterans Administration, 34 percent; Securities and Exchange Commission, 46 percent; Department of Energy, 57 percent; Agriculture, 48 percent, and Defense, 42 percent. At the Environmental Protection Agency, 52 percent of the workers covered by FERS are contributing to the thrift plan.
Of the approximately 2 million federal workers under the old retirement system (which limits contributions to 5 percent of pay), thrift board data for the end of August shows that 372,690 are now voluntarily putting money into the savings plan.
Next year employes covered by the FERS program will be able to invest part of their money into two new accounts, one a fixed-income account and the other an option based on the stock market.