Proposal Expanding TSP and FEHB to Wider Audience

By on January 29, 2015 in Current Events, Pay & Benefits with 12 Comments

The Thrift Savings Plan (TSP) and the Federal Employee Health Benefits Program (FEHB) have been successful federal employee benefits for a number of years.

Perhaps because of the success of these programs, there are periodic proposals to expand these programs to open them up to a wider audience. The impact on these programs of expanding them to include new groups is difficult to assess. Adding new groups could make the programs more successful or overwhelm programs that have been successful and make a valuable federal benefit less useful or valuable to the original audience.

The latest proposal, according to Military Times, is in a new report on military compensation that will propose fundamental changes to military retirement and health care benefits. As you may have guessed, this would incorporate military personnel into the TSP and the FEHB.

The new report could call for setting up a system to enroll each military service member into the TSP. Each military member would be responsible for managing a personal account. The TSP for military members would presumably operated in a similar way to the civilian program with the federal government contributing to each individual TSP account.

Currently, military personnel can contribute to the TSP but generally without any government match. Funds in the TSP are typically not available for withdrawal without penalty until the investor is 59 ½ years of age.

Military personnel would retain their TSP funds after they separate from the service. The proposal would therefore provide some retirement benefits those who leave the military before reaching the military’s retirement milestone of 20 years of military service.

The new military retirement plan would also include some version of a defined-benefit pension to those who have a military career. That pension would presumably be less generous than the current retirement system. Of course, any of these changes would depend on what changes, if any, are passed by Congress.

The proposal would only impact future military personnel; not those currently serving in the military.

Adding Military Retirees into the FEHB

The proposal would also change how health care benefits are provided to military families and retirees. The Tricare system is now used for health care. Under the new system, the FEHB system could be used to provide health care services. This could be beneficial to the federal employee health insurance system as it would spread the risk pool over a wider group of people. Whether the system would be disrupted by adding a large number of new FEHB beneficiaries would need to be assessed and, hopefully, any changes necessary would be implemented to maintain the current level of service.

Implications of Changes

The large national debt, that continues to grow much larger each year, is putting pressure on government sending. With this financial pressure growing, and the corresponding political pressure to eventually deal with the problem, federal employees are likely to experience changes in pay and benefits.

While changing military benefits is not a direct change to the federal civilian programs, it is obvious the civilian component of the government will feel repercussions from these changes.

On a broader level, the major changes being proposed for the military system are likely to also lead to proposed changes to the civilian structure of pay and benefits.

2015 is shaping up to be an interesting year for the federal workforce. As significant changes are made or proposed, we will keep our readers informed of the changes.

 

 

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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