Sen. Marco Rubio (R-Fla.) on Tuesday called for opening the
federal Thrift Savings Plan to all Americans as part of a broad proposal for
restructuring retirement benefits and helping workers prepare for their golden
years.
The TSP is a 401(k)-style savings plan available to federal
employees and military personnel. Participants invest part of their pre-tax
income into the program, and the government matches that amount — the matching
does not apply to members of the military.
Rubio, widely considered to be a top contender for the 2016
Republican presidential nomination if he decides to run, also called for
changes to Social Security and Medicare, saying the programs are in danger of
becoming insolvent by the time he reaches retirement age.
We’ll examine those proposals later in this article, but
first let’s look at why the TSP might interest Americans who work in the
private sector.
The Thrift Savings
Plan
Financial experts cite the TSP as a model for 401(k) plans
because of its simplicity, low fees and diverse investment options, among other
benefits. Rubio said it is unfair that all Americans can’t participate in the
program.
“The twisted irony is that members of Congress, who are
employees of the citizens of the United States, have access to a superior
savings plan, while many of their employers, the American people, are often
left with access to no plan at all,” he said during a National Press Club event
this month.
A spokeswoman for the TSP investment board said that
granting access to non-federal workers would diminish the focus on existing
participants, according to a Government Executive article. She also said that
obtaining data from millions of private employers would “require a completely
different set of operational capabilities.”
It’s worth noting that federal agencies perform much of
TSP’s administrative work, meaning taxpayers are subsidizing the costs of the
program to a large extent. Under Rubio’s plan, the government would pick up a
lot more of that taxpayer-funded work, or else the TSP would have to raise its
fees — something federal employees would surely oppose.
Social Security
Rubio proposed raising the retirement age, capping benefits
for the wealthiest recipients and waiving payroll taxes for older employees who
continue to work after they qualify for payments.
The left-leaning Alliance for Retired Americans accused the
freshman senator of trying to dismantle Social Security, saying in a statement
on Tuesday that his plan “shows how out of touch he is with the needs of
current and future retirees.”
Medicare
Rubio proposed a “premium-support” plan that would allow
Americans to choose either private insurance plans or enroll in the traditional
Medicare program. The government would contribute a set amount toward their
premiums, and beneficiaries would have to cover the difference on their own if
their plans cost more — or they would receive a refund if the costs are lower.
Rep. Paul Ryan (R-Wisc.) has pitched a nearly identical plan
for the past several years, but Democrats have opposed the idea, saying it
amounts to a voucher system that would limit health coverage.
Also Noteworthy
Federal workers do not rely solely on the TSP for retirement
savings. They also receive defined benefits through one of two other plans,
either the Civil Service Retirement System or the Federal Employees Retirement
System, depending upon when they were hired.
Those who participate in the latter program receive Social Security
benefits upon retirement.
Similar to Rubio’s plan for the TSP, Rep. Darrell Issa
(R-Calif.) last year proposed a bill that would have opened federal-employee
health coverage to all Americans, saying the measure would help address some of
the nation’s healthcare challenges.
The proposal picked up bipartisan support from Reps. William
Lacy Clay (D-Mo.) and Mick Mulvaney (R-S.C.), who cosponsored the legislation,
but the bill never came up for a vote in the House.
Source: Washington
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