Savings plan automatic enrollment considered

Federal Workers

August 25, 2006|By Melissa Harris | Melissa Harris,SUN REPORTER

The managers of the federal government's 401(k)-style plan -- the country's largest -- are weighing whether to automatically enroll workers and military personnel in the savings program.

Civilian enrollment in the plan is high, fluctuating between 85 percent and 87 percent for members of the federal government's retirement system.

But less than one-quarter of military personnel have voluntarily enrolled, said Thomas J. Trabucco, a spokesman for the Thrift Savings Plan's five-member board. Members of the military do not receive matching contributions from the Department of Defense.

Although Thrift Savings board staff members have examined automatic enrollment for more than a year, recent pension reform legislation encouraging it in the private sector has renewed interest. The goal of the legislation, which President Bush signed last week, is to increase enrollment in private-sector 401(k) plans to 90 percent.

"It makes people's inertia work in favor of participation," Trabucco said. "Young people tend to just accept whatever their employer does, and it's clearly a good thing for people to save for retirement."

There are, however, some drawbacks to automatic enrollment, namely the additional administrative costs associated with removing people who do not want to participate. Once an employee has asked to be removed, the plan could stop taking money from the worker's paycheck, but often people want the invested money returned.

"You have to establish an unwind process to get the money out of their account," Trabucco said. "With a plan the size of the TSP, with participants in every time zone around the world, that's a big undertaking and a complicated administrative matter."

The board decided this week to take up the matter again in November.

The federal legislation signed last week, called the 2006 Pension Protection Act, enacted three changes to the federal plan:

Beginning in 2008, TSP participants will be able to transfer money out of their 401(k) account and directly into a Roth IRA. That transfer must be recorded as taxable income, but those funds will not be taxed when withdrawn from the IRA.

Reservists called to active duty for more than 179 days after Sept. 11, 2001, and before Dec. 31, 2007, may withdraw money from their TSP account without the 10 percent penalty.

Beginning Jan. 1, all TSP beneficiaries, not just spouses, will be able to transfer TSP funds into an IRA when the participant dies. That transfer no longer will be taxed.

Tax court judges can now participate in the TSP but will not receive matching contributions.

Identity cards

A McLean, Va.,-based contractor has been selected to begin delivering new identity cards to federal employees, academics and contractors, who regularly use federal buildings and computer systems, by the end of October.

The cards will digitally store fingerprints and signatures and deny unauthorized workers access to sensitive areas. The effort is required under a presidential Homeland Security directive to improve security in federal buildings.

More than 2 million people are expected to get the cards, which would enable the tracking of employees' computer network access and movement among buildings. It also would make it easier for workers who regularly travel among agencies.

"I can't unequivocally say that this will eliminate the need for all other access cards or passwords," said Jon K. Anderson, a spokesman for the General Services Administration, which is supervising the contract. "But we are trying to make something that's simple to create and can be programmed to store data and increase interoperability. Something that will make it so much easier for me, the federal worker, to work with other agencies."

The five-year contract, which was awarded to BearingPoint Inc., is estimated at $104 million. Agencies are not required to use this contractor and may manage the delivery of the new identity cards independently. The hope is that if a vast number of agencies sign up with the GSA-selected contractor, agencies' costs will drop.

The writer welcomes your comments and feedback. She can be reached at melissa.harris@baltsun.com or 410-715-2885. Recent back issues can be read at baltimoresun.com/federal.

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