TSP Contribution Caps, Locality Pay, No Budget Pain For Feds, And More
October 28, 2015
The cap on annual individual contributions to employer-sponsored retirement savings plans, including the Thrift Savings Plan, will remain at $18,000 in 2016, according to the Internal Revenue Service.
"In general, the pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment," said the IRS in an announcement on the agency's website.
The limit applies to the combined total of contributions to traditional and Roth accounts. For military service members, the cap includes all traditional and Roth contributions from taxable basic pay, incentive pay, special pay and bonus pay, but does not apply to traditional contributions made from tax-exempt pay earned in a combat zone.
In addition, catch-up contributions for employees age 50 and older remain at the same level -- $6,000 – next year. So for those employees, their individual contributions cannot exceed $24,000 for the year. Those interested in catch-up contributions need to make a separate election request for that option.
For 2016, the limit for the total amount of all TSP contributions on behalf of an employee -- individual, agency automatic and matching – also is unchanged at $53,000.
Here's a fact sheet that the TSP released in 2013 with frequently asked questions regarding annual TSP contribution limits.
In other retirement news, a new survey from First Command Financial Behaviors Index found that 70 percent of middle-class military families who plan to make a career out of the service said they want to be grandfathered into the military's current retirement system. Last week, President Obama vetoed the fiscal 2016 Defense authorization bill that contained a major overhaul of the military retirement system, phasing in changes that would allow non-career military service members to boost their retirement nest eggs. The changes, based on recommendations from the Military Compensation and Retirement Modernization Commission, would automatically enroll new troops into the Thrift Savings Plan at 3 percent of their pay with a 1 percent government deposit. Later, the government would be able to match up to 5 percent of any extra contributions service members make.
The reforms would affect new service members, while current service members could choose to opt into the new system or remain the current one. To encourage members to stay in the military, the bill includes a commission proposal to provide "continuation pay" after 12 years of service. Service members who stay in the military for 20 years, and are thereby entitled to a retirement pension, would receive a less generous calculation for their annuity under the reforms.
Now, personnel who serve less than 20 years—about 83 percent—do not receive a defined benefit, which some believe is unfair given their multiple deployments during the wars in Iraq and Afghanistan. Those who do spend a career in the military can hit the 20-year mark relatively early, retire from service in their 40s or 50s, draw a pension and work elsewhere for a while. About 17 percent serve 20 years or more in the military.
Respondents to the survey, however, did express support for the proposed blended retirement system. "When asked to explain why, those in favor of the proposed system said it will increase 'the amount of people who would be eligible for benefits' and 'provide more financial benefits' for service members."
While some of the provisions in the Defense authorization bill, including the reforms to the military retirement system, are somewhat in limbo, Congress is poised to pass a two-year budget agreement soon. The deal raises the debt limit and provides some relief from sequestration without a sacrifice from federal employees. Congressional leaders and the White House rolled out a proposed budget deal for fiscal years 2016 and 2017 that does not contain any provisions targeting the pay or benefits of the federal workforce. Previous budget agreements have not been so favorable for feds: For instance, the 2013 deal increased the amount new government hires must contribute to their pensions.
The 2015 Bipartisan Budget Act also would prevent many retirees, including those covered under the Civil Service Retirement System, from absorbing a 52 percent increase in Medicare Part B premiums, made worse by the lack of a 2016 cost-of-living adjustment. The budget agreement would extend the "hold harmless" provision of the Social Security Act in 2016 to those affected by the increase, so that they will pay $123.70 per month (including a surcharge) next year rather than $159.
More good news for some feds: The Obama administration finalized on Tuesday its proposal that 102,000 federal employees receive a significant raise next year, implementing its decision to create 13 new locality pay areas. An additional 6,300 federal workers would also receive a pay bump as they are moved from the "rest of United States" designation and into specific localities, according to a final rule issued by the Office of Personnel Management. OPM did not set the exact amounts for each locality percentage, saying President Obama would determine those rates in a forthcoming executive order. Check out the story by Eric Katz here.
Also on Tuesday, the Senate unanimously passed legislation that would give disabled veterans hired as federal employees access to their full year's sick leave immediately upon starting their jobs. The Wounded Warriors Federal Leave Act would give 104 hours of sick leave up front to first-year feds who are vets with a service-connected disability rating of at least 30 percent to attend medical appointments related to their disability. During their first year on the job, those vets would still accumulate their normal sick leave. The employees would only be able to use their extra sick leave for treatments directly related to their service and would not be able to carry over the one-time "wounded warrior leave" after the first 12 months on the job.
The bill, which the House passed in September, now heads to Obama for his signature.
(Image via Subbotina Anna / Shutterstock.com)
October 28, 2015
TSP Contribution Caps, Locality Pay, No Budget Pain For Feds, And More
Posted by: sarah_oz@yahoo.com
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