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Thrift Savings Plan Kicks Off Open Season

By Rudi Williams
American Forces Press Service

WASHINGTON, Oct. 15, 2004 – The federal government's Thrift Savings Plan kicked off its 2004 "open season" today with slogans to remind members of the uniformed services and civilian government employees that they can increase their retirement coffers substantially by investing in TSP.

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The TSP Open Season slogan, "Let It Flow," markets the savings program to Federal Employees Retirement System, or FERS, and to Civil Service Retirement System, or CSRS, employees. Artwork courtesy of TSP

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Open season the period when people can enroll in the program or change their options -- runs through Dec. 31. "Let It Flow" is this open season's slogan aimed at federal civilian employees, while "Save For Later. Start Now" targets military personnel and other members of the uniformed services. Brochures are being distributed to eligible participants.

More than 85 percent of workers covered by the Federal Employees Retirement System, or FERS, and about 67 percent of employees covered by the Civil Service Retirement System contribute to TSP, a 401K-type savings program.

"As of the end of September, we have more than 1.8 million FERS participants, 475,000 CSRS contributors and 435,000 military participants," said Tom Trabucco, director of external affairs for TSP's overseer, the Federal Retirement Thrift Investment Board. "All of the money goes into the common fund and is invested by fund, which is more than $141 billion for military and civilian investors."

Most contributions are invested in five different funds. As of Sept. 30, the Government Securities Investment, or "G" Fund had $58.8 billion in it; the Common Stock Index Investment, or "C" Fund had $59.6 billion; the Fixed Income Index Investment, or "F" Fund had $10.3 billion; the Small Capitalization Stock Index Investment, or "S" Fund had $7.6 billion; and the International Stock Index Investment, or "I" Fund had $4.5 billion.

"This brings the total up to $141 billion," Trabucco said.

"Open season is a good time make the initial decision on whether or not you will contribute to TSP if you're not currently contributing," Trabucco noted. "It's also the time to increase your contributions to take advantage of the increased amounts that you're allowed to contribute this year. If you're not contributing the maximum, now is your time to take a look and see if you can or should."

The primary difference between the 2003 and 2004 TSP open season is "you can contribute more this open season," Trabucco noted.

He pointed out that servicemembers can contribute from special pay as well as basic pay. Civilian can contribute only from basic pay.

"In the 2003 open season, which was really for calendar year 2004, the contribution limits were 9 percent of pay, up to a maximum of $13,000 a year," Trabucco explained. "For the current open season, which will cover 2005, eligible employees who are members of the uniformed services may contribute up to 10 percent of pay, to a maximum of $14,000. Those numbers apply to uniformed services and CSRS employees.

"FERS people may contribute up to 15 percent of basic pay each pay period, but only up to the elective deferral limit of $15,000 that's set by the Internal Revenue Service," he said. "FERS people who make more than $93,333 per year should be concerned about exceeding the $15,000 limit. If they're in that category, we have a fact sheet on the Web site, along with a worksheet so they can work it out so that they're sure they put in their maximum amount and pick up the maximum matching contributions from the government."

As soon as an employee is covered by FERS are eligible for agency contributions, the agency will automatically contribute an amount equal to 1 percent of the employee's basic pay each pay period, whether or not he or she contributes. If employees contribute their own money, the agency will match the employee's contributions dollar-for-dollar on the first 3 percent the employee contributes each pay period and 50 cents on the dollar for the next 2 percent the employee contributes.

Trabucco pointed out that this may be the last TSP open season, because legislation has passed the U.S. Senate and is in the House of Representatives that would eliminate open seasons in the future. The congressional measure would allow people to make their contribution elections at any time.

"So it's an improvement, and one that we and the participants will welcome," he said.

Trabucco said the board is looking into creating "Lifecycle Funds" beginning next year. These funds provide the benefits of professional asset management to participants who choose them. "That means Lifecycle Funds will be set up based on different years when you would plan on drawing down your account balance," Trabucco explained. "We don't know what those years will be established at yet. That's part of the procurement process, and we're collecting bids from industry now on how to structure them.

"For instance, there will be a fund that is established for the year 2015, a second fund for the year 2025, a third fund for the year 2035," he said. "What you would do is pick the year in which you plan on beginning to draw down your funds and you simply invest in that. The allocation of those investments would be automatically adjusted over time based on the structure of that life cycle fund -- in essence, going from a heavier weighting in stocks in the early years and more toward an investment in bonds and government securities the more stable investments as you get closer to the year when you're going to begin drawing those funds down."

TSP participants age 50 or older who are contributing the maximum amount of regular contributions may also elect to make additional "catch-up" contributions up to $3,000 for 2004, and $4,000 for 2005, Trabucco noted.

"Those contributions allow those age 50 and over to put in additional funds. It will rise to $5,000 in 2006, where it will remain stable."

Those who choose to make catch-up contributions can do so at any time, but they must make a new election for each calendar year. For more information, they should check with their agency or service TSP representative for guidance about when to submit their election. Civilian employees should use Form TSP-1-C. The form for members of the uniformed services is Form TSP-U-1-C.

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Thrift Savings Plan

Click photo for screen-resolution imageThe TSP Open Season slogan, "Save For Later. Start Now," targets uniformed services personnel. Artwork courtesy of TSP   
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