Despite last month's 2.36 percent decline in the Standard & Poor's 500, the federal 401(k) plan's C-fund, which tracks the S&P 500 index, chalked up a 20.92 percent return for the 12-month period ending in May.

The 12-month returns of each to the thrift savings plan's three funds are reported this time each month by the Federal Retirement Thrift Investment Board. The report shows federal investors how the funds have done in the short term (monthly), as well as over the longer 12-month period.

Individuals who are eager to develop or enlarge ulcers also can monitor the ups and downs of the S&P 500, other indexes, various investment funds or individual stocks minute by minute via cable TV or the Internet. Most experts discourage that, however, saying people, especially those investing for retirement, should take a long-term approach.

During the 12 months ending in May, the G-fund (special U.S. Treasury securities) returned 5.5 percent, and the F-fund (bond index) returned 4.34 percent.

In calendar year 1998, the C-fund returned 28.44 percent; the G-fund, 5.74 percent; and the F-fund, 8.7 percent. In 1997, the C-fund returned 33.17 percent; the G-fund, 6.77 percent; and the F-fund, 9.6 percent.

Years of double-digit returns by the S&P 500 index have pushed the accounts of a growing number of federal 401(k) plan investors toward the $500,000 mark. Most of the money in the thrift savings plan is now invested in the C-fund.

All of the workers whose account balances passed $400,000 this year have several things in common: They are upper-income workers; they are enrolled in the newer Federal Employees Retirement System; and they have been investing the maximum 10 percent of salary (and getting a 5 percent government match) exclusively in the C-fund since the stock index fund became available.

FERS employees who invest nothing of their own still get a 1 percent contribution to a savings plan account from the government. Those who invest at least 5 percent get a full 5 percent match from the government. Employee and matching contributions are made on a tax-deferred basis.

Employees under the older Civil Service Retirement System can invest up to 5 percent of salary but do not get a government match because their civil service pension benefits are more generous. FERS was designed like a private-sector plan requiring employees to contribute to their own retirement by paying the full Social Security tax and participating in their 401(k) plan.

Retired government workers can remain in the savings plan. But retirees cannot join the savings plan, nor can they add money (which can be done only by regular payroll deduction) to their savings plan accounts. Like active-duty workers, they can move money from one account to another any time.

Federal law limits the amount of money anybody (government or private-sector worker) can contribute to a 401(k) plan to $10,000 a year. That amount is adjusted to rise with inflation. Most private-sector 401(k) plans limit the percentage of salary that workers can contribute based on a complicated formula that takes into account the relative percentage contributions of higher- and lower-income workers. The federal 401(k) plan is not subject to that so-called anti-discrimination rule and allows employees to contribute up to 5 or 10 percent based on which pension plan they are under.

Rep. Constance A. Morella (R-Md.) has introduced a bill that would allow federal workers to contribute the maximum $10,000 a year, regardless of income or retirement plan. That would primarily benefit workers under the CSRS system who have the extra income to max out. The administration opposes the legislation because the increase in tax-deferred contributions would cost the Treasury billions of dollars.

Meet the Senator

Sen. Paul S. Sarbanes (D-Md.) is the scheduled speaker at Friday's luncheon of the National Association of Retired Federal Employees. The session, sponsored by the Bethesda-Chevy Chase chapter of NARFE, will be held at the Naval Medical Center Naval Club. For details, call Katherine Clements at 301-469-7120.

FLRA Training

The Federal Labor Relations Authority will have a two-day training session Monday and Tuesday at the International Trade Center in Washington. The session will provide an update on the 20-year-old Federal Service Labor-Management Relations law and talk about new developments in the program. For details, call 703-902-1241.

Mike Causey's e-mail address is causeym@washpost.com

Wednesday, June 9, 1999