Back Story on the Tobacco Bill

Despite gavel-to-gavel coverage of Congress and the media microscope on government operations, much of what happens here in Washington is under the radar.

Hearings, at which news is sometimes made, are held. It gives the interested public something to watch and the media something to report. But often the final outcome is decided weeks, days or hours before anybody votes.

Like with the just-approved Tobacco Bill.

Last week the Senate voted, as part of the Tobacco bill, to extend the Roth investment option to the federal Thrift Savings Plan. That means, within a year or two, feds will be able to invest future after-tax contributions going into the TSP in the Roth option. When they withdraw that money, no matter how big the balance is grown, it will all be tax-free. That’s a huge benefit to the vast majority of feds.


But Congress disappointed, as in “angered”, a lot of feds (specifically those under the FERS retirement plan) by failing to approve a provision that would have given FERS employees retirement credit for unused sick leave. CSRS employees have that incentive, but for FERS folk, sick leave is a use-it-or-lose-it proposition. Lots of them use it. According to the government they use it to the tune of about $68 million per year.

The House approved a wide-range of pro-fed benefits in the Tobacco bill it approved and sent to the Senate. But…

Insiders say that Obama administration fiscal watchdogs quietly got out the word that nothing in the Tobacco bill that would cost the government/taxpayers money would be satisfactory to the administration. They endorsed the Roth option because, since it will bring in much more tax revenue, it pays for itself. But the others cost money.

And that was a no-no.

The House pleased federal and postal workers, and their unions, by endorsing a batch of pro-fed benefits as part of its version of the Tobacco Bill. But it also took the unusual position before any Senate vote, that it would not go to conference with the Senate if the Senate approved a different, stripped down, version of the bill. Which is what it did.

These are the House-passed perqs that were stripped by the Senate and allowed to go unchallenged in a conference.

Normally the House and Senate would hold a conference, at which one of two of the perqs might have been approved. But this bill, giving the FDA control over tobacco, was fast-tracked and the White House and Congress didn’t want it delayed, nor did they want it to come with any add-on costs such as the pro-fed perqs.

Many CSRS workers are disappointed they won’t be able to phase into retirement by working part time. Many FERS employees are angry that they remain under a use-it-or-lose-it sick leave system. Many former FERS employees are upset that they will not be allowed to buy back their federal service time if they rejoin the government.

But that, as they say on Capitol Hill, is show biz…

Roth Investment Option

Within a year or two federal investors will be able to put some of their after tax-TSP contributions into a Roth option within the federal 401(k) plan. They will also be able to put some of their pre-tax TSP contributions into outside mutual funds. At 10 a.m. EDT tomorrow on our Your Turn with Mike Causey radio show, Tom Trabucco from the Federal Retirement Thrift Investment Board explains the timetable and it will work. Certified Financial Planner Rebecca Schreiber will talk about the pros and cons of investing in a Roth vs. a regular 401(k) plan, and about the outside investment option. You can listen in at (click the LISTEN LIVE icon) anywhere, or in the DC area on WFED 1500 AM.

If you have questions for either guest, you can e-mail them to me:

Nearly Useless Factoid
by Suzanne Kubota

Included in the rules for the West Virginia Road Kill Cook-off is a reminder that “Judges will deduct points for every chipped tooth resulting from gravel not removed from the RoadKill.”