Fortunately, there haven't been many attempts to find savings in the TSP program in annual attempts to lower federal employee benefits. Image: Talaj/Shutterstock.com
By: John GrobeGroundhog Day takes place every year on February 2nd. This past Groundhog Day, I thought of the eponymous 1993 movie in which Bill Murray played Phil Connors; an individual who was doomed to relive the same day over and over until he confronted his issues and moved forward with his life.
In the movie, character Phil Connors relived the same day 38 times, and 414 additional repeated days were mentioned in the film. But that’s not all the repetition: whatculture.com deduced that Connors repeated the same day over 12,000 times before correcting his flaws and moving on with his life. That’s 33 years! That’s an awful long time to be repeating the same mistake.
Following my thoughts on the movie, I then thought of the recurring threats to federal benefits that have been proposed in the past and are likely to be proposed yet again by the current administration. Hopefully we will not be going through as many threats as Connors went through the repetition of February 2nd.
Let’s look at some of the threats aimed at the TSP. Fortunately, there weren’t many shots taken at the TSP in past assaults at our benefits. The vast majority of the benefit reductions were directed at health insurance and FERS; things like changing to a high-five from a high-three, eliminating the Retiree Annuity Supplement (RAS), etc.
A House budget document that has been circulating this year among Capitol Hill Republicans eyes savings of $44 billion over 10 years by requiring all FERS employees to contribute 4.4 percent of salary toward their retirement benefits, as well as:
* ending the annuity supplement for those who retire under FERS before age 62 that is paid until they reach that age and can claim Social Security benefits would yield $5 billion-$13 billion.
* basing the annuities of future retirees on the highest five consecutive salary years rather than the current three would yield $4 billion.
* changing the premium sharing system in the FEHB to a voucher system in which the government’s share would be set at a flat amount and increased at a rate lower than the growth in premiums would yield $16 billion-$18 billion.
What threat was directed at the Thrift Savings Plan?
A main threat was to change how earnings accrued in the G fund. As you probably know, the G Fund is invested in short-term Treasuries, but pays a rate that is calculated based on the earnings of outstanding Treasuries with four or more years to maturity. In normal times, the short-term rate is significantly less than the way the TSP calculates the G Fund’s earnings. That’s not as true today but will likely become true as time goes by. It’s very likely that this change to the TSP will come up again soon.
What other threats may the TSP face? I’m only speculating, but what about a lower percentage employer match? After all, 20% of private sector employer sponsored plans have no match at all, and the average match is 3% (given 50 cents on the dollar, up to 6% of salary). How about higher fees, resulting in less earnings for participants?
In researching this article, I discovered that Groundhog Day was first recognized in 1887, in the administration of the first President (Grover Cleveland) to serve non-consecutive terms. Cleveland was also instrumental in weakening the spoils system and beginning civil service reform. Threats to our benefits will be re-emerging in the administration of the second President to serve non-consecutive terms.
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See also
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
