Senate-House conferees on the defense authorization bill have been warned that opening up the federal thrift savings plan to military reservists could increase fees for full-time active-duty personnel who take part in the giant 401(k) plan.
Participation in the plan is now limited to civilian federal workers. This year, Congress proposed including full-time active-duty military personnel. They would be allowed to contribute 5 percent of military pay to the plan on a tax-deferred basis. The Federal Retirement Thrift Investment Board, which runs the savings plan, endorsed the inclusion of active-duty military personnel in the program but has now sent up a warning flag.
The Senate-passed version of the authorization bill contains language that would also open up the plan to 840,000 part-time military reservists, as well as the 1.5 million active-duty military personnel. Allowing reservists in, according to Roger W. Mehle, executive director of the Federal Retirement Thrift Investment Board, would be a mistake. He said it would impose greater costs on active-duty military personnel who invest in the federal 401(k) plan. In a letter last week to Senate-House conferees, Mehle warned that the small contributions of reservists would produce account balances that wouldn't cover the cost of creating and administering a record-keeping system for them. He said that active-duty personnel who could amass much larger accounts would therefore have to subsidize reservists with much smaller accounts. Generally speaking, reservists make only about 62 days of military pay each year. That includes being paid for two weeks of summer training, plus double pay (equal to four days) for attending monthly weekend drills. By contrast, civilians can (and active-duty military personnel could if the law was changed) contribute on a much larger base salary.
In his letter to Congress, Mehle wrote that "the board would be pleased to provide thrift savings plan benefits to the 1.5 million full-time uniformed" military personnel, but strongly opposes the "unsound" idea of including reservists "because of the tiny benefit" to them vs. the cost of administration. Under the plan, investors pay administrative fees of about 60 cents per $1,000 of account balance each year. The average plan account of workers under the Federal Employees Retirement System is worth about $40,000. Investors under the old Civil Service Retirement System have an average account balance of a little more than $25,000.
The board estimates that because of their low military earnings, the typical reservists who join the plan--and make the maximum 5 percent contribution--would be able to contribute only about $200 a year to the savings plan. The board said that building a system that would administer accounts for reservists would not be cost effective and the expenses of the system would have to be shared with full-time active duty military account holders. That would mean all military investors would pay much more for their accounts than civilians, the board warned.
Military personnel have been eager to get into the savings plan, which has been available to civilians for more than a decade. Some high-income, longtime federal civilian investors who put their money exclusively in the C-fund (stock index) now have account balances worth nearly $400,000.
Folks who know Mehle say that his objections are strictly fiscal. He spent 25 years in the Navy. That includes 10 years on active duty and an additional 15 in the reserves.
Jobs For Women
The percentage of women in government--and in middle- and upper-grade jobs--has increased during the Clinton administration. That is expected to be part of the good news message Office of Personnel Management Director Janice R. Lachance will deliver tomorrow. She is to speak at the 30th annual training program of Federally Employed Women Inc. FEW is meeting at the Phoenix Civic Center.
The administration has eliminated more than 300,000 federal civilian jobs. But the careful use of buyouts (aimed mostly at retirement-age men) and "targeted" recruitment and hiring efforts resulted in a percentage increase in the number of women and Hispanics in the federal service. Both groups represent major voter blocs that the Clinton administration is eager to hold to help Vice President Gore in his effort to increase the percentage of Tennesseans who have become president.
Mike Causey's e-mail address is email@example.com
Tuesday, July 20, 1999