Weekend Reading on Your Federal Benefits 35-18.jpg

(for the week of August 25th – August 31st)

You’re too busy during the week to keep up on all the news around your employee benefits and pay. My weekly summary of the most interesting and relevant news stories could help you and includes my comments and insights.

By the way, if you’ve read something about your employee benefits that you think is important or interesting, share it. And, let me know about news sources that you follow. Have a great weekend.

George Ray
Federal Benefits Online

In this week’s benefits news for Feds, we regret to learn that the pay freeze is on, we hear about some no-cost investment funds that are supposedly challenging the TSP’s low-expense leadership, and ask the rather shocking question “Should We Kill FERS?”. Yikes. Let’s get started.

Note: It’s the Labor Day weekend— considered to be the end of Summer. The kids are heading back to school, and so should we (after the weekend’s over, of course). As my thank you to all your dedicated labor to serve our country throughout the year, I would like to offer you my online benefits course “Understanding Your Federal Benefits” at a discount for a limited time. Use the coupon code ‘laborday30’ to GET 30% OFF from now until Monday at midnight (Mountain time). And thank you for the work that you do.

Upcoming Deadline for Federal Pay Raise and Freeze

Govmatters.tv

Nicole Ogrysko, who we normally follow over at Federal News Radio, is interviewed in this 5-minute video by Government Matters TV host Francis Rose on the deadline that’s coming up for the President to provide his direction on a pay increase or pay freeze for Feds for the 2019 fiscal year. We discussed this deadline (which arrives today, August 31st) last week. This interview is certainly interesting, but news doesn’t remain news very long since as of late Thursday . . .

Trump Formalizes Federal Pay Freeze Plan for 2019

From Govexec.com

There is no longer a question of where the White House stands on Federal pay for the coming year. “I have determined that for 2019, both across-the-board pay increases and locality pay increases will be set at zero,” Trump wrote in a letter to Congress. “These alternative pay plan decisions will not materially affect our ability to attract and retain a well-qualified federal workforce.” Well, some may disagree, Mr. President.

Congress will get to weigh in on the final decision. The Senate included a 1.9% pay increase for next year for Federal employees, but the House did not address the issue in its recent legislation. So now they will need to get together. If the House adopts the Senate’s proposed increased, you could be getting a raise next year, although the President still can veto the increase that Congress approves. The administration has repeatedly said it wants your pay to be performance-based and has asked for a $1 billion interagency fund to award hard working Feds-- but so far hasn’t gotten it. We’ll know the final outcome in the next few weeks.

TSP No Longer Low Expense Leader

From Fedsmith.com

Michael Wald over at Fedsmith goes through lots of gyrations this week to try to convince us that there are less expensive places to invest than your Thrift Savings Plan (TSP). And I have to admit that I’m not convinced, but I’ll you decide for yourself. (I don’t provide investment advice, and this isn’t any.)

Yes, there’s been a recent introduction of zero-cost funds by Fidelity. You could invest in a Total Market Index Fund which is designed to replicate the S&P 500 Index (just like the C Fund in the TSP). There’s also a no-cost International Index Fund (kind of like the TSP’s International Fund). Vanguard is also racing to zero by eliminating commissions on nearly 1,800 Exchange Traded Funds (ETFs). That’s all interesting news, but these funds aren’t available in the Thrift Savings Plan, and will likely never be made available.

Mr. Wald suggests that once you’ve received the maximum matching contribution from the TSP, you should consider whether the TSP is your best choice. Yes, we all know by now that expenses make a difference, but the difference between these other funds and the funds inside the TSP is slight at best. And there is a lot of convenience to having your contributions deducted automatically from your pay (usually pre-tax, unless you’re using the Roth TSP feature) and having your retirement savings in one place that’s easy to track. I would agree that distributions options need to be better, but that’s coming soon. And the TSP still has the G Fund, although the administration has been trying to kill that golden goose for some time. (Read my post titled ‘What if They Change the G Fund?” for more on why that’s been on the agenda.)

So, what do you think? Do you even care about these zero cost funds? Or are you more concerned about the question . . .

Should We Kill FERS?

From ChiefHRO.com

In his blog this week, Jeff Neal of ChiefHRO says he was asked a question during a recent interview that seems rather shocking, “Should We Kill FERS?” If you’re covered under the Federal Employees Retirement System (FERS) pension you’re probably saying ‘no way’, but as Jeff suggests in his article there are reasons to consider it.

There’s been a shift away from defined benefit pension plans by the private sector for many years. They’re costly to maintain and to fund. It also seems that the way people move around from company to company these days that few are ever really around long enough to qualify to earn much of a pension if any at all. Some in the human resources industry argue that young employees don’t really understand the value of this type of benefit and prefer to see money adding up inside their 401(k) savings plan, which is much easier to see than a monthly check that is promised many years in the future.

By the way, don’t be too shocked by Mr. Neal’s headline. It’s unlikely that a benefit that you’ve been promised for many years (and one that you’ve earned under the existing law) would be completely pulled out from under you. As I’ve suggested in the past, any change will likely (in my humble opinion anyway) be grandfathered—in much the same way that we saw the Civil Service Retirement System (CRSR) phased out when FERS was introduced in the mid-1980’s. But will the Fed’s pension plan be eliminated like so many plans in the private sector?

As Jeff states, this is a much bigger problem—not one just involving government employees. Americans, in general, are struggling to save for retirement and the savings plans we’ve put in place as a substitute for the pensions of days long ago (your is more the exception than the rule) is not solving our retirement crisis. It’s not a partisan issue. We need to get smart people from lots of disciplines together to help us devise a better solution to help everyone live a more comfortable retirement. That’s a tall order.

See you next week. Thanks!

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