The House adopted a fiscal year 2016 budget Wednesday that calls for higher retirement contributions from federal workers and a lower rate of return for the Thrift Savings Plan's G Fund.
In the 228-199 vote, House members approved a package that projects $127 billion in savings over 10 years by having federal workers contribute an additional 6% of salary into the Federal Employees Retirement System, Washington. Currently, workers pay 0.8% to 7% of salary, depending on when they were hired. TSP is part of FERS. FERS had $412 billion in assets at the end of fiscal year 2014, the most recent data available, according to the Office of Personnel Management
Another $32 billion in savings is projected to come from changing the maturity period of the $193 billion G Fund within the $440 billion TSP, to a three-month average instead of the current four-year average. As of Thursday, that would make the rate of return drop to 0.01% from 0.3%. “It would make the fund virtually worthless,” TSP spokeswoman Kim Weaver said in an interview. She added that the projected savings would be illusory “because we would do anything we could to get everybody out of (the G Fund).” If the measure is enacted, “we would have to seriously consider creating another fund,” Ms. Weaver said.
Colleen M. Kelley, president of the National Treasury Employees Union, which represents 150,000 federal employees at 31 agencies, said the G Fund idea “makes no sense” because the same formula for computing the rate is used for other federal trust funds, including Social Security. The additional 6% retirement contributions “are in effect a 6% pay cut,” Ms. Kelley added.
The Senate votes Friday on its own 2016 budget package, which also calls for federal workers to pay an additional 6% into their retirement accounts but does not include the G Fund return rate idea. The next step is for the two chambers to produce a final budget for the President Barack Obama to sign. Mr. Obama's signature is considered unlikely.
In a statement, the White House criticized House Republicans, which they said “made clear that once again their priority is to cut taxes for millionaires and billionaires and return our economy to the same top-down economics that has failed the American people before.”
