April 20, 1999
The Administration supports the goals of H.R. 208, which would allow
Federal employees to begin contributing to the Government's Thrift Savings
Plan (TSP) immediately upon their employment and to transfer funds into the
TSP from certain other tax-deferred savings plans, such as 401(k) plans.
The Administration would support H.R. 208 if it were amended to delete the requirement that agencies make additional Federal Employees' Retirement System (FERS) contributions to the Civil Service Retirement and Disability Fund (Fund). This provision is intended to offset the reduction in revenues that would result from immediate employee TSP participation, which would, in effect, make additional funds subject to tax deferral. Such contributions, however, are unrelated to: (1) the benefits derived from the TSP, and (2) the retirement programs -- FERS and the Civil Service Retirement System -- that are financed by the Fund. The Administration is concerned that requiring such non-programmatic deposits into the Fund would set a bad precedent, possibly leading to the future use of the Fund as a source for payments unrelated to the retirement programs. Furthermore, the bill would prohibit agencies from paying these additional FERS contributions from funds available for salaries and benefits, thereby making compliance with this provision difficult or impossible for agencies with little or no funding other than for salaries and benefits.
In addition, the Administration strongly urges the Congress to amend the bill to provide automatic and matching employer contributions to the TSP as soon as an individual begins employment with the Federal Government. It is important for the Federal Government to lead, not follow, private sector employers in providing more meaningful retirement benefits to workers.
The Administration will work with the Congress to address these issues and to offset fully the bill's pay-as-you-go costs (described below).
H.R. 208 would affect receipts; therefore, it is subject to the pay-as-you-go (PAYGO) requirement of the Omnibus Budget Reconciliation Act of 1990. OMB's preliminary PAYGO estimate indicates that the bill would decrease receipts by approximately $14 million over the period FYs 2000-2004.