The TSP annual leave investment option under consideration in Congress could benefit many employees nearing retirement since many have substantial amounts of unused annual leave to their credit at retirement.

Under the proposal, which has been attached to several bills, when individuals separate from government for retirement (or other reasons) they could invest the amount in the TSP rather than receive it directly. That option already is common in the private sector, sponsors say.

The combined investment of payroll withholdings and annual leave value would have to fall within the overall annual dollar limits on investing for a calendar year. For employees investing at or near the maximum in the TSP ($17,000 this year, plus $5,500 more allowed for those age 50 or older) the value of the annual leave payment might not fit within those limits.

For example, for an employee earning the average federal salary of about $75,000 with 30 days of unused annual leave, the value of the payment would be above $8,000.

Thus, the provision might act as an incentive for employees who are considering retiring near the end of a calendar year to put off their retirement until after the turn of the year, to be free to invest the full annual leave payment in the new year.