[Congressional Record Volume 154, Number 59 (Tuesday, April 15, 2008)]
[Extensions of Remarks]
[Page E620]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                INTRODUCTION OF THE ROTH TSP ACT OF 2008

                                 ______
                                 

                          HON. THELMA D. DRAKE

                              of virginia

                    in the house of representatives

                        Tuesday, April 15, 2008

  Ms. DRAKE. Madam Speaker, today is tax day. This is a day when all 
Americans are reminded of the federal government's treatment of their 
hard-earned money, investments, and retirement savings. Our 
servicemembers in Iraq and Afghanistan think about these issues as 
well. I firmly believe it is time to improve the options at their 
disposal to secure a comfortable retirement after their service to our 
Nation.
  Currently, two common options available in the private sector used as 
retirement savings tools are the Individual Retirement Account (IRA) 
and a 401(k), which is an employer-sponsored retirement plan where the 
employer matches the employee's contributions up to a specified limit. 
Both can be structured as either a ``Traditional'' or ``Roth'' plan.
  Many are familiar with the Roth and Traditional IRA options as Roth 
IRAs have been around since 1998. However, a Roth 401(k) is a fairly 
new option that is similar to the Roth IRA in that it allows after-tax 
contributions to fund tax-free retirement income.
  The Roth 401(k) option was established as part of the Economic Growth 
and Tax Relief Reconciliation Act of 2001 (EGTRRA) and went into effect 
on January 1, 2006. The Pension Protection Act of 2006, signed into law 
by President Bush on August 17, 2006, makes the Roth 401(k) permanent, 
removing the December 31, 2010 expiration date that previously was in 
force.
  Traditional IRA and 401(k) plans are funded through tax-deferred 
contributions or ``before-tax'' contributions, which means the money 
contributed is taken out of a person's pay before Federal and, in 
almost all cases, state income taxes are withheld. Any earnings are 
also tax-deferred. This means that an individual does not pay income 
taxes on contributions and earnings in their IRA or 401(k) account 
until their money is withdrawn, usually at retirement.
  With a Roth plan, an individual does not receive the tax deduction 
for their contribution, but all the money in the account grows tax-free 
and can be withdrawn tax-free subject to certain criteria. For many, 
the Roth is the better deal.
  As such, more and more companies have started to offer Roth 401(k)s 
since they were allowed to start doing so two years ago, and many firms 
that don't yet provide this option are considering adding it in the 
future.
  However, in a glaring omission, this same option has not been 
extended to the federal Thrift Savings Plan (TSP), which is the federal 
government's in-house 401(k) retirement savings plan for the federal 
workforce and our men and women in uniform.
  That is why today I have introduced the Roth TSP Act of 2008. This 
bill will simply provide the same 401(k) options available in the 
private sector to participants in the TSP. Currently, there are 3.9 
million account holders in the TSP. These include civilians who are 
employed by the U.S. Government and our military personnel.
  Our men and women in uniform and the federal workforce may find the 
option to structure their retirement plans as a Roth TSP to be a better 
deal. My legislation will place the same options available in the 
private sector at their disposal and provide another option when 
considering their long term financial and retirement planning. Allowing 
this option could provide greater growth potential and greater return 
on investment for their retirement savings than under the traditional 
TSP structure.
  Consider the potential benefit to our military. If military personnel 
serve in a combat zone as an enlisted person or as a warrant officer 
for any part of a month, all military pay received for military service 
in that month is excluded from their gross income. For commissioned 
officers, the monthly exclusion is capped at the highest enlisted pay, 
plus any hostile fire or imminent danger pay received. With a Roth TSP, 
these individuals could earn this pay tax-free, grow their investment 
in their Roth TSP, and then withdraw it all tax-free after age 59\1/2\, 
having never been required to pay taxes on the invested money.
  The men and women of our military worry about consequences on a day-
to-day basis that most Americans never even consider. The least we can 
do in return is provide our service members with choices and options 
that will allow them to plan for their future and help to ensure that 
they never have to worry about a secure retirement.

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