Tuesday, February 19, 2013
Sequestration could affect federal employee retirement accounts quickly
Prolonged furloughs of federal employees because of sequestration could have significant effects on the ultimate values of their 401(k)-like retirement plans, because federal contributions to the Thrift Savings Plan (TSP) would stop, or be otherwise reduced.
The story appears in the Washington Post on the Federal Eye page Tuesday, written by Eric Yoder, link here
When people are permanently laid off and receive severance from private companies, typically matching contributions continue. Mine did, when I took out a biweekly payout until the amount ran out (after 24 weeks, back in 2002). I still left ING with a 401(k) balanced in relatively good shape.
When I worked for the federal government (Navy Department, NAVCOSSACT) in 1971-1972, I did not pay Social Security FICA, but made a contribution to the federal retirement program instead, which I could take out a lump sum (to buy a car) when I left for private industry. Pretty reckless of me at the time.
I do remember paying FICA and Medicare tax when working for Census in 2010 and 2011.
Federal employees began a switch to Social Security in 1984. The history is complicated, but is explained here by Social Security at this link.