[Senate Report 108-290]
[From the U.S. Government Publishing Office]
Calendar No. 606
108th Congress Report
SENATE
2d Session 108-290
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THRIFT SAVINGS PLAN OPEN ELECTIONS ACT OF 2004
__________
R E P O R T
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE
to accompany
S. 2479
TO AMEND CHAPTER 84 OF TITLE 5, UNITED STATES CODE, TO PROVIDE FOR
FEDERAL EMPLOYEES TO MAKE ELECTIONS TO MAKE, MODIFY, AND TERMINATE
CONTRIBUTIONS TO THE THRIFT SAVINGS FUND AT ANY TIME, AND FOR OTHER
PURPOSES
June 25, 2004.--Ordered to be printed
_____
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON: 2004
29-010
COMMITTEE ON GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Michael D. Bopp, Staff Director and Chief Counsel
Jennifer A. Hemingway, Professional Staff Member
Heather E. Hogg, Professional Staff Member, Subcommittee on
Financial Management, the Budget, and International Security
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Larry B. Novey, Minority Counsel
Nanci E. Langley, Minority Deputy Staff Director, Subcommittee on
Financial Management, the Budget, and International Security
Amy B. Newhouse, Chief Clerk
Calendar No. 606
108th Congress Report
SENATE
2d Session 108-290
======================================================================
THRIFT SAVINGS PLAN OPEN ELECTIONS ACT OF 2004
_______
June 25, 2004.--Ordered to be printed
_______
Ms. Collins, from the Committee on Governmental Affairs, submitted the
following
R E P O R T
[To accompany S. 2479]
The Committee on Governmental Affairs, to which was
referred the bill (S. 2479) to amend chapter 84 of title 5,
United States Code, to provide for Federal employees to make
elections to make, modify, and terminate contributions to the
Thrift Savings Fund at any time, and for other purposes, having
considered the same, reports favorably thereon and recommends
that the bill do pass.
CONTENTS
I. Purpose and Summary..............................................1
II. Background.......................................................2
III. Legislative History..............................................5
IV. Section-by-Section Analysis......................................6
V. Estimated Cost of Legislation....................................7
VI. Evaluation of Regulatory Impact.................................10
VII. Changes in Existing Law.........................................11
I. Purpose and Summary
S. 2479, the Thrift Savings Plan Open Elections Act of
2004, is a bill to modernize certain rules relating to
contributions by federal employees to the Thrift Savings Plan
(TSP). The purpose of the legislation is to allow employees to
make, modify, or terminate contributions to the TSP at any
time, without penalty. In addition, the legislation would
require the Federal Retirement Thrift Investment Board to
evaluate its current education program to ensure that
participants have access to the tools needed to make informed
investment choices regarding the TSP.
II. Background
Prior to enactment of the Social Security amendments of
1983,\1\ federal employees were not covered by Social Security,
and received their pensions through the Civil Service
Retirement System (CSRS).\2\ The 1983 amendments mandated
coverage for civilian federal employees hired after January 1,
1984, and led to enactment of the Federal Employees' Retirement
System Act of 1986 (FERSA).\3\ The Federal Employees'
Retirement System (FERS), created by FERSA, consists of three
elements: (1) Social Security,\4\ (2) a basic annuity, and (3)
the TSP. Of the 2,670,000 active federal and Postal Service
employees as of September 30, 2003, 1,882,000 (70 percent) were
covered by FERS and 788,000 (30 percent) were covered by
CSRS.\5\
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\1\ Public Law No. 98-21 (1983).
\2\ Public Law No. 66-215 (1920).
\3\ Public Law No. 99-335 (1986).
\4\ Public Law 98-21 mandated that all federal employees hired on
or after January 1, 1984, participate in Social Security. Prior to
enactment of the Social Security Amendments of 1983, no civilian
federal employees participated in Social Security.
\5\ Data from the Office of Strategic Human Resources Policy at the
Office of Personnel Management (June 9, 2004).
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THRIFT SAVINGS PLAN
The TSP is a voluntary, tax-deferred defined contribution
plan, that is available to both federal civilian employees and
members of the uniformed services.\6\ The TSP is administered
by the Federal Retirement Thrift Investment Board.\7\ The plan
has more than 3.3 million participants with assets of
approximately $135 billion.\8\ As of April 2004, 86.4 percent
of FERS employees and 67 percent of CSRS employees had elected
to make payroll contributions to the TSP.\9\ Among members of
the uniformed services, 405,000 were participating in the
TSP.\10\
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\6\ Public Law No. 106-398 (2000) allows uniformed services
personnel on active duty or in the ready reserve to participate in the
TSP under the same terms and conditions as civilian federal employees.
\7\ The Federal Retirement Thrift Investment Board was established
by Public Law No. 99-335 (1986) as an independent agency to administer
the TSP. The Board consists of five members appointed by the President
and confirmed by the Senate. The Board is charged with diversifying the
investments of the TSP in order to minimize the risk of large losses
and to defray the reasonable expenses of administering the TSP.
\8\ Data from the Director of the Office of External Affairs at the
Federal Retirement Thrift Investment Board (June 9, 2004).
\9\ Id.
\10\ Id.
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Federal agencies contribute an amount equal to 1 percent of
an employee's base pay to the TSP for each employee covered by
FERS, whether or not the employee chooses to contribute
anything to the plan. Agencies help their employees meet their
retirement needs by matching FERS employee contributions
dollar-for-dollar on the first 3 percent of pay and at $.50 on
the dollar on the next 2 percent of pay. The maximum agency
contribution is 5 percent of pay. Employees covered by CSRS may
contribute to the TSP; however, they do not receive matching
contributions from their agency. Employees electing to
participate in the TSP are immediately vested in their
voluntary contributions, agency matching contributions, and any
growth in the value of their contributions. Participants are
fully vested in the one percent agency automatic contributions
to the TSP after two to three years, depending on their place
of employment.
The following five funds are currently available to TSP
participants:
The Government Security Investment Fund (G Fund), which is
invested in short-term U.S. Treasury securities specially
issued to the TSP.\11\
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\11\ 5 U.S.C. Sec. 8438 (b)(1)(A).
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The Fixed Income Index Investment Fund (F Fund), which is
invested in fixed-income securities.\12\
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\12\ 5 U.S.C. Sec. 8438 (b)(1)(B).
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The Common Stock Index Investment Fund (C Fund), which is
invested in a portfolio designed to replicate the performance
of an index that includes stocks representing the U.S. stock
market.\13\ The Board has chosen to invest this fund to match
the performance of the Standards and Poor's Corporation (S&P)
500 index, which tracks the performance of major U.S. companies
and industries.
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\13\ 5 U.S.C. Sec. 8438 (b)(2).
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The Small Capitalization Stock Index Investment Fund (S
Fund), which is invested in a portfolio designed to replicate
the performance of an index of U.S. common stocks, excluding
those that are held in the C Fund.\14\
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\14\ 5 U.S.C. Sec. 8438 (b)(3).
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The International Stock Index Investment Fund (I Fund),
which is invested in a portfolio designed to track the
performance of an index of common stocks, representing
international stock markets outside of the United States.\15\
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\15\ 5 U.S.C. Sec. 8438 (b)(4).
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In June 2005, TSP participants will have the option of
placing their contributions into a life cycle fund, or L fund.
The L fund would be invested in the five existing TSP funds,
and its asset allocation would change as the individual
participant approaches his or her retirement.
ELECTIONS FOR THRIFT SAVINGS PLAN CONTRIBUTIONS
The TSP currently holds two open seasons annually, during
which federal employees can join the fund and begin to receive
matching contributions from their agencies or adjust the amount
of employee contributions. Newly hired employees can elect to
contribute to the TSP within a 60-day period after the start of
employment.\16\ Contributions will begin no later than the
first full pay period after the agency accepts the employee's
election. If an employee does not make an election within this
60-day period, he or she must wait until an open season to do
so. The two open seasons are April 15 through June 30 and
October 15 through December 31. Generally, elections are made
effective during the last month of the open season.
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\16\ Public Law No. 106-361 (2000).
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Under current law, employees can stop contributing their
own money to the TSP at any time; however, the employee must
wait before resuming contributions. If an employee elects to
stop contributing during an open season, he or she must wait
until the next open season to start again. If an employee
elects to stop contributing outside an open season, he or she
must wait until the second open season after the election has
ended before contributions can begin again.
In testimony before the Subcommittee on Financial
Management, the Budget, and International Security, Andrew
Saul, Chairman of the Federal Retirement Thrift Investment
Board, stated that the Board supports the elimination of the
open season requirement because it would expand participant
access and simplify the administration of the TSP.\17\ Saul
noted that the open seasons were ``useful when the Plan was
conceived because they provided a structure for the initial
implementation. They are no longer useful in a daily-valued
plan environment.'' \18\ Jim Sauber, Chairman of the Employee
Thrift Advisory Council,\19\ testified that eliminating the TSP
open season is perhaps the single best way to reach the 13
percent of employees in the Federal Employees Retirement System
who still do not make contributions to the TSP.\20\
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\17\ Testimony of Andrew M. Saul, Chairman, Federal Retirement
Thrift Investment Board, before the Subcommittee on Financial
Management, the Budget, and International Security, March 1, 2004, p.
3.
\18\ Id. On June 16, 2003, the TSP launched a new daily valued
record keeping system. The automated system accepts new contributions
and loan payments made via payroll deduction, and allows participants
to request loans and conduct interfund transfers or withdrawals using
web-based tools. The new system values funds daily, and transactions
such as interfund transfers, loans, and withdrawals are processed more
quickly.
\19\ The Employee Thrift Advisory Council is a 15-member body
established by Public Law No. 99-335 (1986) to advise the Federal
Retirement Thrift Investment Board on matters related to the Thrift
Savings Plan. 5 U.S.C. Sec. 8473.
\20\ Testimony of James Sauber, Chairman, Employee Thrift Advisory
Council, before the Subcommittee on Financial Management, the Budget,
and International Security, March 1, 2004, p. 4.
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The Thrift Savings Plan Open Elections Act of 2004 would
allow federal employees to enjoy the opportunities afforded to
many private sector workers to modify their contributions at
any time, without penalty. The Committee believes that the
removal of restrictions placed on employees by the biannual
open season requirement will encourage greater participation in
this important element of the federal retirement system.
While the bill would allow employees to make contributions
to the TSP at any time, it would not change the existing
statutory requirements for the agency automatic 1 percent and
matching contributions, which do not begin until the second
open season, a period that may last from six months to one year
depending upon the employee's date of hire.
RETIREMENT EDUCATION
The Office of Personnel Management (OPM) has broad
authority to design and implement a retirement education
program for federal employees covered by CSRS and FERS. OPM
works with agencies to meet their statutory requirement to
provide retirement counseling that is designed to promote fully
informed retirement decisions by employees.\21\ As part of its
retirement education efforts, OPM is currently working with the
International Foundation for Retirement Education (InFRE) to
develop the Retirement Readiness Project that will be used to
evaluate how well the federal workforce is prepared for
retirement.\22\ OPM is also hosting a series of financial
literacy fairs throughout the country. The TSP is participating
in these fairs.
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\21\ 5 U.S.C. Sec. 8350 (c).
\22\ The outline of the Retirement Readiness Project was provided
in the conference report to accompany Public Law No. 108-7 (2003),
Report 108-10 (2003), pp. 1352-53.
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The Federal Retirement Thrift Investment Board provides
training and information on the TSP; however, it is not
responsible for providing retirement education for the federal
workforce. The Federal Retirement Thrift Investment Board makes
available educational materials to enable federal employees to
make informed decisions regarding the TSP. The Committee
recognizes the Board's recent revision of educational materials
as part of the Board's ongoing effort to inform participants of
the diversity of investment options available.\23\ The
legislation ensures that the current Board's commitment to
improve educational materials will continue by requiring the
Board to conduct periodic evaluations of the educational
materials available to TSP participants. In evaluating the
existing tools available to TSP participants, the Committee
urges the Federal Retirement Thrift Investment Board to ensure
that participants retain their current option to receive such
information in writing instead of electronically.\24\
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\23\ Testimony of Gary A. Amelio, Executive Director, Federal
Retirement Thrift Investment Board, before the Subcommittee on
Financial Management, the Budget, and International Security, March 1,
2004, p. 3.
\24\ As of November 30, 2004, approximately 10,000 participants
have elected to receive written copies of their quarterly statements.
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As with all Americans, federal employees face increasingly
complex financial decisions that will affect their retirement
security. The Committee commends the Board and OPM for seeking
ways to provide retirement education. To further these efforts
the Thrift Savings Plan Open Elections Act of 2004 would also
require the OPM, in consultation with the Federal Retirement
Thrift Investment Board, to develop a retirement financial
literacy and education strategy for federal employees as part
of its existing retirement education activities, and report
such strategy to the Committee on Governmental Affairs and
House Committee on Government Reform. The Committee believes
that the financial literacy and education strategy contemplated
under the legislation will improve federal employees' access to
information to make well-informed retirement planning
decisions. Consultation with the Board will ensure that federal
employees have access to the complete array of materials that
discuss the importance of TSP as a component of their
retirement. The Committee intends to use both the OPM strategy
and TSP's periodic reports to measure the level and quality of
the retirement education program available to federal
employees, including those participating in the TSP.
III. Legislative History
S. 2479 was introduced by Senators Susan Collins, Daniel
Akaka, Peter Fitzgerald, Joseph Lieberman, and George Voinovich
on May 21, 2004, and was referred to the Committee on
Governmental Affairs. The legislation was subsequently referred
to the Subcommittee on Financial Management, the Budget, and
International Security that same day. On June 1, 2004, the
Subcommittee on Financial Management, the Budget and
International Security favorably polled out S. 2479 to the full
Committee.
On June 2, 2004, the Committee on Governmental Affairs
considered S. 2479 and ordered the bill reported by voice vote
without amendment. Senators present: Akaka, Bennett, Carper,
Collins, Fitzgerald, Lautenberg, Levin, Lieberman, and
Voinovich.
IV. Section-by Section Analysis
Section 1. Elections for Thrift Savings Plan Contributions
This section would amend chapters 83 and 84 of title 5,
United States Code, to allow federal employees to make, modify
and terminate contributions to the Thrift Savings Fund at any
time.
Subsection (a) titles the bill as the ``Thrift Savings Plan
Open Elections Act of 2004.''
Subsection (b) would amend section 8432(b)(1)(A) of title
5, United States Code, to require the Executive Director of the
Federal Retirement Thrift Investment Board to prescribe
regulations under which federal employees may begin, modify,
and terminate contributions to the Thrift Savings Fund at any
time. The subsection states that contributions will take effect
on the earliest date after the election that is
administratively feasible, and will remain in effect until such
contributions are modified or terminated.
Subsection (c) would amend section 8432(b)(4)(C) of title
5, United States Code, to make clear that the automatic agency
contributions and employer matching contributions will not
begin to be made with respect to an employee or member until
the date that such contributions would have begun to be made in
accordance with the paragraph as administered on the date
preceding the date of enactment of the Thrift Savings Plan Open
Elections Act of 2004.
Subsection (d) would make technical and conforming
amendments to chapters 83 and 84 of title 5, United States
Code.
Subsection(d)(1) would amend section 8351(a)(2) of title 5,
United States Code, to allow employees under the Civil Service
Retirement System to begin, modify, and terminate contributions
to the Thrift Savings Fund at any time.
Subsection (d)(2) would amend section 8432(b)(2) of title
5, United States Code, to allow contributions by previously
ineligible employees to be made at any time.
Subsection (d)(3) would amend section 8439(c)(2) of title
5, United States Code, to require the Federal Retirement Thrift
Investment Board to provide information about their enrollment
options on a regular basis to individuals for whom an account
is maintained. Section 8439(c)(2) of title 5 requires the
information to be designed in a manner to facilitate informed
decisionmaking.
Subsection (d)(4) would amend section 8440a(a)(2) of title
5, United States Code, to allow justices and judges of the
United States as defined by section 451 of title 28, United
States Code, to begin, modify, and terminate contributions to
the Thrift Savings Fund at any time.
Subsection (d)(5) would amend section 8440b(a)(2) of title
5, United States Code, to allow bankruptcy judges and
magistrates to begin, modify, and terminate contributions to
the Thrift Savings Fund at any time.
Subsection (d)(6) would amend section 8440c(a)(2) of title
5, United States Code, to allow a judge of the United States
Claims Court who is covered by section 178 of title 28, United
States Code, to begin, modify, and terminate contributions to
the Thrift Savings Fund at any time.
Subsection (d)(7) would amend section 8440d(a)(2) of title
5, United States Code, to allow a judge of the United States
Court of Appeals for Veterans Claims to begin, modify, and
terminate contributions to the Thrift Savings Fund at any time.
Subsection (d)(8) would amend section 8440e(b)(2)(A) of
title 5, United States Code, to allow a member of the uniformed
services as defined by section 211 of title 37, United States
Code, to begin, modify, and terminate contributions to the
Thrift Savings Fund at any time.
Section 2. Enhancing financial literacy
This section would amend title 5, United States Code, by
adding a new section to improve the educational materials
available to Thrift Savings Plan participants.
Subsection (a) would require the Federal Retirement Thrift
Investment Board to periodically evaluate whether the tools
available to participants provide the information needed to
understand, evaluate, and compare financial products, services,
and opportunities offered through the Thrift Savings Plan.
Subsection (b) would require the Federal Retirement Thrift
Investment Board to provide an annual report, to the Senate
Committee on Governmental Affairs and the House Committee on
Government Reform, of its Thrift Savings Plan education efforts
on behalf of plan participants.
Subsection (c) would require the Office of Personnel
Management, in consultation with the Federal Retirement Thrift
Investment Board, to develop a retirement financial literacy
and education strategy for federal employees no later than six
months after the date of enactment of the Thrift Savings Plan
Open Elections Act of 2004. In consulting pursuant to this
section, the Federal Retirement Thrift Investment Board is
limited to providing the Office of Personnel Management with
information concerning the features of the TSP. This subsection
would also require the Office of Personnel Management, in
consultation with the Federal Retirement Thrift Investment
Board, to submit a report to the Committee on the strategy
developed under this subsection.
V. Estimated Cost of Legislation
CONGRESSIONAL BUDGET OFFICE ESTIMATE
S. 2479--Thrift Savings Plan Open Elections Act of 2004
Summary: S. 2479 would make changes to the rules that
govern participation in the federal employees' Thrift Savings
Plan (TSP). Namely, it would allow federal employees and
members of the uniformed services to begin or alter their TSP
contributions at any time instead of limiting such changes to
biannual open-season periods. The bill also would require the
Federal Retirement Thrift Investment Board--the agency which
administers the TSP--to evaluate and report on efforts to
increase education programs for TSP participants. CBO estimates
that implementing the bill would cost $2 million in 2005 and
$30 million over the 2005-2014 period, subject to the
appropriation of the necessary amounts. We also estimate the
bill would decrease tax revenues by $1 million in 2005 and $23
million over the 2005-2014 period. Finally, the bill also would
affect spending and collections of the U.S. Postal Service, but
CBO estimates that those changes would result in no significant
net effect on direct spending in any year.
The bill contains no intergovernmental or private-sector
mandates as defined by the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated costs to the Federal Government: The estimated
budgetary impact of S. 2479 is shown in the following table.
The costs of this legislation would fall within multiple budget
functions.
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By fiscal year in millions of dollars--
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level............. 2 2 3 3 3 3 3 3 4 4
Estimated Outlays......................... 2 2 3 3 3 3 3 3 4 4
CHANGES IN REVENUES
Estimated Revenues........................ -1 -2 -2 -2 -2 -2 -3 -3 3 -3
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Note.--Enacting S. 2479 also would affect direct spending, primarily at the U.S. Postal Service; but CBO
estimates that there would be no significant net effect on direct spending in any year.
Basis of estimate: For the purposes of this estimate, CBO
assumes this would be effective in January 2005 and that the
necessary appropriations for the additional federal agency
contributions would be provided.
Background
The TSP is a tax-deferred, defined contribution pension
plan open to most federal employees and members of the
uniformed services. Federal employees who are covered by the
Federal Employees' Retirement System (FERS) may contribute up
to 14 percent of basic pay to their TSP account up to the
Internal Revenue Service (IRS) statutory maximum ($13,000 in
2004). Employees who are covered by the Civil Service
Retirement System (CSRS) and members of the uniformed services
may contribute up to 9 percent of basic pay up to the IRS
maximum. Participants who are 50 years old or older may
contribute an additional $3,000 above the caps that would
otherwise apply to their contributions.
Employees who are covered by FERS are also eligible to
receive contributions from their employing agency. Agencies
automatically contribute 1 percent of basic pay toward the TSP
accounts of employees who are covered by FERS, regardless of
whether the employee is making a contribution. Employing
agencies then match employee contributions up to 5 percent of
pay. Agency matches are dollar for dollar on the first 3
percent of employee contributions and 50 percent on the next 2
percent. Agency contributions begin after the second open
season after an employee becomes eligible to participate in the
TSP. CSRS employees and members of the uniformed services do
not receive agency contributions to their TSP accounts.
Under current law, newly hired federal employees and
members of the uniformed services have a 60-day period in which
they may begin making ASP contributions. If they fail to do so,
employees must wait until an open season period to begin making
contributions. Open seasons run each year from April 15 to June
30 and from October 15 to December 31. In addition, current TSP
participants may only change their contributions during an open
season period. Participants may elect to increase or decrease
the amount of money they are contributing during those periods,
with changes effective during the first pay period after the
close of the open season. Participants may choose to terminate
their TSP contributions at any time, although they must wait
until the second open season after contributions are terminated
before they can start contributing again.
S. 2479 would eliminate the initial enrollment period and
allow participants to change their contributions at any time.
Once a participant elects to change his or her contribution
amount, the change would take effect almost immediately. The
bill places no limit on how many times participants may change
contributions, or how large such changes can be, as long as
they remain within the overall contribution limits. Changes to
agency contributions that would be initiated by changes to
participant contributions would also take effect immediately.
The bill would not affect when agency contributions begin for
newly eligible employees--those would still start after the
second open season after which an employee is first eligible to
participate in the TSP.
Spending Subject to Appropriation
Over time, participants generally increase the percentage
of pay they contribute to their TSP accounts. The longer one
has worked for the federal government, the greater percentage
of pay one usually devotes to TSP contributions. According to
data from the Thrift Investment Board, FERS employees who first
participated in TSP in 1989 contributed an average of 5 percent
of pay during their first year of participation. By the fifth
year of participation, the average level of contribution for
this group was about 6 percent, and by the 14th year of
participation the average contribution level was almost 8
percent.
By providing participants with greater flexibility to
start, stop, and change contributions, S. 2479 would cause some
people to increase or decrease contribution levels sooner or
later than they do under the current open season system.
However, given the tendency for participants to increase their
contributions over time, CBO assumes that allowing greater
flexibility would generally lead participants to increase their
contributions slightly sooner than they would have otherwise.
On average, participants increase their contributions by
roughly 0.2 percent of pay each year, and CBO predicts that
under S. 2479 this increase would take place one month earlier
then under the current system. For those in FERS who are
contributing less than 5 percent (about 500,000 federal
workers), the faster increase in participant contributions
would increase agency matching contributions as well. Agency
contributions, which are paid from personnel budgets, are
usually spending subject to appropriation. CBO estimates that
S. 2479 would cause agency contributions to increase by $2
million in 2005, $13 million over the 2005-2009 period, and $30
million over the 2005-2014 period.
Revenues
Because income taxes are deferred on TSP contributions, the
anticipated increase in participant contributions initially
would result in lower income tax revenue.\1\ The program
maintains nearly 3 million accounts, with approximately 2.3
million participants currently making their own contributions.
Social insurance taxes would not be affected by the bill, as
wages invested in TSP remain subject to social insurance taxes.
CBO estimates S. 2479 would reduce income tax revenue by $1
million in 2005, $9 million over the 2005-2009 period, and $23
million over the 2005-2014 period.
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\1\ TSP assets and earnings on those assets are subject to tax once
they are drawn on.
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Direct Spending
CBO anticipates that S. 2479 would have a similar effect on
contributions among employees of the U.S. Postal Service as it
would on participants employed by other federal agencies. As
such, increases in TSP contributions among Postal Service
employees would increase slightly, as would agency matching
contributions for those in FERS contributing less than 5
percent of pay. However, unlike most other agencies, the Postal
Service has the ability to increase its income to cover
increases in its operating costs, which are classified as
direct spending. CBO assumes the bill would increase Postal
Service matching contributions by about $1 million to $2
million annually, but that such increases would be offset by
increased receipts from postal rates. Such changes may not be
simultaneous, so there could be some small net effect on direct
spending in any particular year, but CBO estimates that there
would be no significant net effect in any year.
In addition to granting increased flexibility over
participant contributions, S. 2479 also would require the
Federal Retirement Thrift Investment Board to periodically
study and report on efforts to educate TSP participants about
the financial products and services which the program offers.
Operations of the Board are funded from forfeitures of the
automatic 1 percent agency contribution for employees who
separate before vesting and from a share of earnings on
participant and agency contributions. CBO does not anticipate
the bill would cause a significant increase in the Board's
administrative costs. Any cost increases which do occur would
be offset by drawing funds available from contribution
forfeitures or by increasing the share of investment earnings
that are used to cover administrative expenses. Therefore, S.
2479 would have no net effect on direct spending over time.
Intergovernmental and private-sector impact: S. 2479
contains no intergovernmental or private-sector mandates as
defined by UMRA and would impose no costs on state, local, or
tribal governments.
Estimate prepared by: Federal Outlays: Geoffrey Gerhardt;
Federal Revenues: Barbara Edwards; Impact on state, local, and
tribal governments: Leo Lex; and Impact on the Private Sector:
Karen Raupp.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis and G. Thomas Woodward, Assistant
Director for Tax Analysis.
VI. Evaluation of Regulatory Impact
Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee has
considered the regulatory impact of this bill. CBO states that
there are no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act and no costs on
state, local, or tribal governments. The legislation contains
no other regulatory impact.
VII. Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic and existing law, in which no
change is proposed, is shown in roman):
TITLE 5, UNITED STATES CODE
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GOVERNMENT ORGANIZATION AND EMPLOYEES
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PART III--EMPLOYEES
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Subpart G--Insurance and Annuities
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CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM
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Subchapter III--Civil Service Retirement
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Sec. 8351. Participation in the Thrift Savings Plan
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(a)(2) An election may be made under subparagraph (1) [only
during a period] as provided under section 8432(b) for
individuals who are subject to chapter 84 of this title.
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Subchapter III--Thrift Savings Plan
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Sec. 8432. Contributions
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(b)(1)(A) (i) The Executive Director shall prescribe
regulations under which employees and Members [shall be
afforded a reasonable period every 6 months to elect to] may
make contributions under subsection (a), to modify the amount
to be contributed under such subsection, or to terminate such
contributions. [An election to make such contributions shall
remain in effect until modified or terminated.]
(ii) An election to make contributions under the
paragraph--
(I) may be made at any time;
(II) shall take effect on the earliest date after the
election that is administratively feasible; and
(III) shall remain in effect until modified or
terminated.
(b)(2) Under the regulations.--
(A) an employee or Member who has not previously been
eligible to make an election under this subsection
shall not become so eligible until the [second period]
date (described in paragraph (1)) beginning after the
date of commencing service as an employee or Member;
(B) an employee or Member whose appointment or
election to a position or office in the Federal
Government follows a previous period of service during
which that individual met the requirements of
subparagraph (A) shall be eligible to make an election
under this subsection notwithstanding any period of
separation;
(C) an employee or Member who elects under
subparagraph (D) to terminate contributions shall not
again become eligible to make an election under this
subsection until the [second period] date (described in
paragraph (1)) commencing after the election to
terminate; and
(D) an election to terminate may be made under this
subparagraph at any time [other than during a period
afforded] as provided under paragraph (1).
(b)(4)(C) (i) Notwithstanding the preceding provisions of
this paragraph, contributions under paragraphs (1) and (2) of
subsection (c) shall not be payable with respect to any pay
period before the earliest pay period for which such
contributions would otherwise be allowable under this
subsection if this paragraph had not been enacted.
(ii) Notwithstanding subparagraph (A) or (B), contributions
under paragraphs (1) and (2) of subsection (c) shall not begin
to be made with respect to an employee or Member described
under paragraph (2) (A) or (B) until the date that such
contributions would have begun to be made in accordance with
this paragraph as administered on the date preceding the date
of enactment of the Thrift Savings Plan Open Elections Act of
2004.
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Sec. 8439. Accounting and information
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(c)(2) Information under this subsection shall be provided
[at least 30 calendar days before the beginning of each
election period under section 8432(b)(1)(A) of this title] on a
regular basis, and in a manner designed to facilitate informed
decisionmaking with respect to election under section 8432 and
8438 of this title. Nothing in this paragraph shall be
considered to limit the dissemination of information only to
the time required under the preceding sentence.
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Sec. 8440a. Justices and judges
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(a)(2) An election may be made under paragraph (1) [only
during a period] as provided under section 8432(b) for
individuals subject to this chapter.
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Sec. 8440b. Bankruptcy judges and magistrates
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(a)(2) An election may be made under paragraph (1) [only
during a period] as provided under section 8432(b) for
individuals subject to this chapter.
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Sec. 8440c. Claims Court judges
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(a)(2) An election may be made under paragraph (1) [only
during a period] as provided under section 8432(b) for
individuals subject to this chapter.
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Sec. 8440d. Judges of the United States Court of Appeals for Veterans
Claims
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(a)(2) An election may be made under paragraph (1) [only
during a period] as provided under section 8432(b) for
individuals subject to this chapter.
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Sec. 8440e. Members of the uniformed services
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(b)(2)(A) Except as provided in subparagraph (b), an
election to contribute to the Thrift Savings Fund under this
section may be made [only during a period] as provided under
section 8432(b)[, subject to the same conditions as prescribed
under paragraph (2) (A)-(D) thereof.].
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