Federal Employees should keep a close eye on a Senate Bill targeting highway funds. The bill focuses on funding an extension of the Highway Trust Fund. However, attached to the bill are proposed changes that would affect federal retirement benefits in the TSP.
The proposed changes include cuts and other changes to the TSP retirement programs. These changes to the way yields that are paid to you in various TSP funds could raise about $80 billion, which would cover around two to four years of federal funding for road and bridge projects, according to the Washington Post.
Almost half of the projected $80 billion in money raised would come from cuts to a retirement investment program. In total, the bill would divert some $30 million from the federal retirement plan. The bill has yet to pass, and many lawmakers say they do not believe the bill will pass with the retirement cuts included. Without the cuts, lawmakers will have to find a lot of money elsewhere to replace those funds.
The TSP G-Fund
The proposed changes, originally discussed during the 2016 budget, would affect the TSP G-Fund of the Thrift Savings Plan. Currently, the TSP G-Fund interest rates are based on a four-year average. This makes it a fairly reliable investment with traditionally higher returns. Proposed changes would change the interest rate formula to a three-month average, raising some $32 million over the span of 10 years.
If the bill goes into effect, it would start on January 1, 2017. Other proposals that went through congress included a plan to raise retirement contributions to 6 percent of their salaries. In 2014, new employees had to pay 4.4 percent towards their retirement fund, a 1 percent increase from the year before and a nearly 3 percent increase from 2012. Congress later dropped this proposal and replaced it with cuts. However, some legislators are continuing to push for an increase in retirement contributions.
Other Federal Retirement Proposals on the Table
Some proposals on the table include changing federal retirement benefits and federal annuity formulas to focus on the highest five-years of pay instead of the most current three years. Some reports suggest that the government has filtered some $159 billion from federal employees over the last five years to put towards deficit reduction.
Representative Don Beyer, a Democrat from Virginia, told the Federal Times “congress cannot continue to treat federal employees as a piggy bank to balance the budget.”
The Senate is scheduled to consider a decision on the highway bill that features cuts to the retirement benefits program next week. No set dates have been declared for contribution changes as of yet. To buy more time to consider alternative changes to achieve the money necessary to extend the Highway Trust Fund, the house passed a short-term extension through December. This gives Congress more time to consider retirement benefits as well as other tax issues.
If Congress opts to leave federal employee retirement benefits alone, the bill could allow for the extension of the road program via a six-year bill using money from tax reforms. Federal employees may want to keep an eye on the news to stay up to date on potential changes to their retirement interest rates.
More TSP and Federal Retirement Related Articles
Federal Employee Retirement Checklist by Gary Fouts
What Are Your TSP Options With the New Phased Retirement Program? by June Kirby
Understanding The Thrift Savings Plan (TSP), By Todd Carmack
