TSP Catch-Up Bills Still Alive

Sponsors of bills (HR-3340 and S-1822) that would allow TSP investors age 50 and older to make special “catch-up” investments hope to move the plan in the waning days of Congress. The bills would allow investments over and above the percentage of salary or dollar limit amounts applying to them of $1,000 this year, $2,000 in 2003 and phasing up to $5,000 in 2006. A potential hangup was overcome earlier this year when congressional budget leaders agreed that the costs were accounted for in a tax reform law passed last year that allowed catch-up contributions by private sector workers. That overruled an opinion by Congress’s own budget office that the additional costs in lost tax revenue of $408 million over 10 years would have to be made up elsewhere. Supporters also note that the White House’s budget assumed that the TSP catch-up provision would be enacted. However because it is getting late in the year, it is uncertain whether the $1,000 catch-up contribution for this year would take effect; catch-up contributions would have to be made through payroll withholding, meaning the TSP and individual agencies would have to change their procedures.