The Thrift Savings Plan kicks off an "open season" tomorrow with slogans designed to remind government employees that long-term savings can increase their income in retirement.
"Let It Flow" is TSP's reminder to federal employees to keep making contributions. About 87 percent of workers covered by the Federal Employees Retirement System and about 67 percent covered by the older Civil Service Retirement System deposit tax-deferred dollars in the 401(k)-type program.
"Save For Later. Start Now." markets the TSP to military personnel and other members of the uniformed services. Congress opened the TSP to these government employees in January 2002, and about 18 percent are using the program to save for retirement.
The slogans, which appear on brochures being distributed to employees, are part of a renewed effort by the Federal Retirement Thrift Investment Board, which oversees the TSP, to improve program services. The board has installed a new mainframe computer and contracted for a second telephone service center in an attempt to improve TSP operations.
The TSP had about 3.3 million participants and about $141 billion in assets at the end of September, making it one of the largest retirement savings programs in the world.
Starting tomorrow and ending Dec. 31, government employees can enroll in the TSP, or, if already participating, can change the amount of their biweekly contributions.
The maximum biweekly contribution is rising to 15 percent of salary for FERS participants and to 10 percent of base pay for CSRS participants and military personnel.
Investments also are subject to a dollar cap, set in the tax code. That limit is rising to $14,000 for calendar year 2005.
Highly paid FERS employees, however, should manage their contributions carefully. If they hit the dollar cap before the last pay period of 2005, their contributions will shut off and so will the government's matching contributions. The government, as employer, pays up to 4 percent as a match and provides an automatic 1 percent contribution for FERS employees.
Experts advise that FERS employees make sure they can contribute at least 5 percent of salary in every pay period in order to capture the maximum government contribution. In doing so, they effectively force the government to give them a raise.
For employees who are worried about bumping up against the dollar cap, the TSP provides a fact sheet, work sheet and an online calculator (www.tsp.gov) to help figure out what biweekly contributions should be. If you expect to earn more than $93,000 in 2005, the limit may affect you.
Since CSRS employees and military personnel get no government contribution, those considerations do not apply to them.
This could be the TSP's last open season. A bill pending in Congress would allow federal employees and military personnel to start or change their TSP contributions at any time instead of just during the open seasons held twice each year.
The Senate has approved its version, but the House has not acted, apparently because of concerns about the costs of certain provisions in its bill. Congressional aides hope to clear up the differences between the bills when Congress returns for a lame-duck session in November.
The most recent TSP tally, from Aug. 31, showed that government employees were contributing $1.35 billion monthly.
Of that, $555.2 million was invested in the common-stock fund, called the C Fund, and $533.8 million went to the government securities fund, known as the G Fund. The rest was spread among a bond fund, a small-capitalization stock fund and an international stock fund. Except for the G Fund, all track market indexes.
Next year, the TSP will likely add anoption -- "lifecycle funds," which are designed for participants who do not have the time or knowledge to manage their accounts and need help with asset allocation.
Under current plans, participants would be asked to predict when they will start withdrawing retirement savings. For employees far from retirement, the investment strategy would be heavily weighted toward stocks. As an employee's "draw down" date approached, the strategy would become more conservative, or tilted toward fixed-income investments.
Diary associate Eric Yoder contributed to this column.