Legislation has been introduced to make this possible, as we’ve been telling you. This would, of course, only apply to those leaving federal service, whether they are retiring or moving into the private sector.
“The Obama administration proposed this for private sector 401(k)s, which are essentially the same thing as the Thrift Savings Plan in the federal government. . . . What this proposal does is, if you have unused leave, it allows you to take [it] and rather than cash it out, put it into your Thrift Savings Plan. HR 4865 passed the full oversight and government reform committee in April and it’s something we’d like to get to the House floor. It would bring parity between the public and private sectors, and it is just another way to encourage federal workers to save for retirement.”
Both Causey and Adcock remind participants that, in most cases, investors wouldn’t be able to convert all of their annual leave into TSP savings because there are limits, imposed by the IRS, on how much one can deposit into the TSP every year.
“It would still run up against those limits, but, of course not everybody’s in the position to max out those limits. This would be another way to be able to maximize the amount of savings that you could have going into your retirement.”
Some have argued that the conversion of annual leave into a TSP investment would cost the federal government millions. Adcock says that isn’t necessarily the case.
“The other part is that, as we know from the tobacco regulatory bill that passed last year that includes the Roth option to the Thrift Savings Plan, it means that, in theory . . . in this situation where you’re allowed to put your unused leave into the TSP, pay taxes on it now and then the IRS would get revenue.”
“Some people are just determined to say that federal workers are overpaid, regardless of what the statistics say. The Bureau of Labor Statistics has been calculating the federal pay gap, which now stands at 26 percent, as bigger than it was during [President Bill] Clinton’s term. They’ve been calculating it the same way for decades, and even during Republican administrations, nobody ever successfully argued that federal employees are overpaid, because it’s just not true.”
Erwin says part of the evidence can be seen with the federal government’s ability to recruit and retain federal employees.
“We see case after case of people getting experience in the federal sector and then moving on to where they can get paid more in the private sector. That hasn’t changed. The main thing that’s changed is that the unemployment rate has gone up. So, I will grant you that we are comparing people working in the federal sector with people working in the private sector, and matching up, yes we’re paid more, [but] we’re only looking at people who have jobs. . . . For a lot of federal jobs, these take a lot of skill and education.”
Erwin says, because of this, his organization doesn’t think it has seen the end of the effort to freeze or reduce federal pay.