Value of TSP Changes Assessed

A proposal that has cleared the House to would automatically enroll all newly hired federal employees with a required personal contribution unless the individual opted out would cost the government–and benefit the employees–some $279 million over the first five years, according to a Congressional Budget Office analysis. CBO based its data on an assumed 3 percent required contribution, current investment rates, expected turnover and other factors. In addition, because of personal contributions into the TSP are non-taxable, there would be a loss in tax revenue of $225 million in that period, CBO said. However, it said those costs would be partly offset by a new $382 million in tax revenue over that time from the bill’s provision for a Roth option in the TSP; in such arrangements money goes in after-tax and comes out along with its earnings tax-free. CBO did not estimate the loss of tax revenue from future withdrawals from Roth accounts versus withdrawals from a regular TSP account, which are taxable.