John Zottoli
John Zottoli has been writing for psretirement.com for over 2 decades now. His has been the work that has been lauded by critics from all over the country.
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TRICARE Young Adult Premiums to Rise
The U.S. Department of Defense has announced higher health insurance premiums for TRICARE’s Young Adult plan.
TRICARE Young Adult is a health plan for certain young adults who are children of military personnel and retirees. Beginning January 1, 2016,
for TRICARE’s Young Adult Prime option, rates will increase to $306 per month; and,
for TRICARE’s Young Adult Standard option, rates will increase to $228 per month.
Department of Defense release NR-411-15, dated October 28, 2015, explained that TRICARE must set these premiums to cover the full cost of TRICARE Young Adult (TYA) beneficiaries. In addition, this release encouraged TYA beneficiaries to “explore all of their health care options and to pick the plan best suited to their needs.”
Regular TRICARE coverage (for example, under a parent’s plan) is available to young adults up to the age of 21 (or 23 if the person is enrolled in college). After that, TRICARE Young Adult is available.
To qualify for TRICARE Young Adult, an individual must be:
- an unmarried child of an eligible sponsor (for example, a retired service member);
- at least 21 but not yet 26 years of age and no longer eligible for coverage under a sponsor’s plan;
- not eligible for an employer plan based on the individual’s own employment, and
- not otherwise eligible for TRICARE coverage.
by John Zottoli
Medicare Premiums to Rise for Some Retirees
On Monday, November 1, President Obama signed legislation that averts what, for many federal retirees, would have been a very large increase in their Medicare Part B insurance premiums. Instead of facing a $50 plus increase, federal retirees who do not receive Social Security payments will see an increase of about $19 a month. This includes a $15.80 a month increase in their basic premium, plus a $3 monthly surcharge.
Retirees whose Social Security income covers their Medicare Part B premiums will see no increase. Current law limits the increases in Medicare insurance premiums that Social Security recipients must pay.
Increases in Medicare premiums may be no larger than a recipient’s increase in Social Security payments. For the 2016 calendar year, there will be no increase in Social Security payments, consequently Social Security recipients are protected from 2016 increases in Medicare Part B premiums.
However, this “hold harmless” provision only applies to retirees whose Social Security income pays their Medicare Part B insurance. Before the November 1 legislation became law, other Medicare Part B beneficiaries would have faced a premium increase from $104.90 to $159.30 per month.
No such “hold harmless” protection exists for Federal retirees who do not get Social Security. Without a change in legislation, these retirees would have had to pay the extra $50 plus in monthly Part B premiums.
To offset lower revenue for the Medicare Trust Fund, Medicare beneficiaries will pay a $3 per month surcharge, for about five years beginning in 2016. Social Security recipients will not pay the $3 surcharge in 2016. However they will pay the surcharge in any future years when their “hold harmless” provision does not apply.
The November 1 legislation reflected a broad-ranging budget and debt-limit agreement negotiated between the President and the Congress. The legislation avoids a default on U.S. Government debt payments. It also raises caps on federal defense and non-defense spending. An additional provision of this legislation caps the increases in Medicare premiums.
— by John Zottoli
Thrift Savings Plan Features – Low Administrative Fees
The Thrift Savings Plan (TSP) is far from alone in offering “index” funds to investors. Many organizations offer similar funds, but one marked difference are the “administrative expenses” that the TSP and other organizations charge.
Think of TSP administrative expenses as a fee, taken out of someone’s investment in a fund — to pay for operating the fund. The fee is a small percentage of the total investment; but even that small percentage, over time, can take a significant bite out of an investment.
The lower the administrative expenses, the smaller the bite — and the more quickly an investment can grow.
In 2014, the administrative expenses for TSP funds were just under .03%. In other words, for every $1,000 of investment, the admin expenses were about thirty cents.
So, how does that thirty cents per thousand dollars compare with the administrative expenses of other index funds? It compares quite well.
Thrift Savings Plan (TSP) Examples
For example, Vanguard offers a fund that, like the TSP’s C Fund, mirrors the performance of the 500 stocks in the Standard and Poor’s S&P 500 index. However, in the Vanguard fund (Vanguard 500 Index Fund Admiral Shares) the administrative expenses were .05% compared to the .03% for the TSP product.
The Fidelity S&P 500 fund (Fidelity Spartan 500 Index Advantage) had administrative expenses of .07% as did the TIAA-CREF S&P 500 Index Institutional.
Even more striking contracts exists with the TSP’s S Fund and similar funds. The S fund has, as its objective, matching the performance of the Dow Jones U.S. Completion Total Stock Market Index — a broad index of stocks of U.S. companies that are not in the S&P 500 index. The comparable Vanguard fund (Vanguard Extended Market Index Fund Admiral Shares) has administrative expenses of .10%, more than three times higher than the expenses of the TSP’s S Fund.
Another fund that is similar to the TSP S fund is USAA Extended Market Index Fund. It’s administrative expenses were .48%, more than fifteen times higher than the TSP S Fund’s administrative expenses.
The same kinds of comparisons exist in bond funds. The TSP F Fund has as its objective matching the performance of bonds in the Barclays Capital U.S. Aggregate Bond Index. This index represents the broad U.S. bond market. One comparable bond fund is Fidelity’s Spartan U.S. Bond Index Fund – Investor Class. That fund’s administrative expenses came to .22%, more than seven times higher than the S&P’s F Fund expenses.
Advice to investors often includes the recommendation to check administrative expenses before deciding to get into or to stay in a particular fund. In such checks, the TSP Products will likely compare favorably. The favorable comparisons are likely to apply both for TSP’s individual funds (C, S and F, for example) as well as for TSP’s Life Cycle (L) funds.
However, administrative expenses are not the only consideration in choosing an investment. Perhaps the convenience of dealing with one firm over an other offsets paying higher administrative expenses on a similar index fund. Furthermore, since different funds often have very different investment objectives, the purposes of the funds (as they relate to an individual investor’s needs) is likely to be a more important consideration than the funds’ administrative expenses.
To sort out questions of where to put their investment dollars, many investors profit from the advice of a knowledge and well-trained financial advisor. Nevertheless, whether acting on their own or with an advisor, prudent investors may want to add administrative expenses to the factors they consider before making investment decisions.
— by John Zottoli. John is a retired Federal human resources specialist who takes an interest in all aspects of planning for retirement.
Recommended Articles
Understanding The Thrift Savings Plan, By Todd Carmack
Social Security for FERS Employees by Todd Carmack
Are You Thinking About a “Deferred” Retirement? by Gary Fouts
Federal Employee Retirement Checklist by Gary Fouts
Bill to Safeguard Federal Retirement Funding Introduced in US Senate
Bill to Safeguard Federal Retirement Funding Introduced in US Senate
Federal employees and retirees worried about how their retirement fund caretakers are handling their saved funds and pensions may soon be able to sleep better.
A bill (Representative Payee Fraud Prevention Act of 2015 – S. 1576), has been introduced in the U.S. Senate that makes federal retirement benefit fraud and misuse a felony.
Specifically, the legislation gives U.S. attorneys the statutory authority to prosecute retiree representatives who misuse funds from the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS).
The bipartisan bill was introduced by Senators James Lankford (R-OK) and Heidi Heitkamp (D-ND). Lankford is the chairman of the Homeland Security and Governmental Affairs Subcommittee on Regulatory Affairs and Federal Management. Senator Heitkamp is a ranking member of this subcommittee, whose jurisdiction includes the federal workforce and federal employee issues.
If passed, this bill would provide federal retirement funds the same protection Social Security and VA payees get for their funding pools.
This ensures that federal retirees who need a financial representative to help manage their payments have the same protections. In short, you will not end up losing your pensions and retirement benefits to embezzlers and the kind of rampant speculation that cost so many people their homes and life savings during the real estate and Wall Street crash.
With a possible felony conviction for misuse and embezzlement of federal retirement funds, most money managers and financial caregivers will take great care and reduce risks to ensure that their clients’ retirement benefits and savings stay safe and sound.
Sen. Lankford said in a statement that “Many government workers devote their lives to public service – we must fight the embezzlement of their benefits to ensure a more reliable retirement for them and their families.”
Sen. Heitkamp said that “Just as so many other Americans do, federal workers rely on their savings and pensions which they worked hard for to retire with dignity… By taking this commonsense step, we can provide needed protections for these individuals and families and make sure they are treated with the respect and care they deserve.”
Other TSP Related Articles
Are You Thinking About a “Deferred” Retirement? by Gary Fouts
What Are Your TSP Options With the New Phased Retirement Program? by June Kirby
Largest Federal Employee Union Files Lawsuit Against OPM
Largest Federal Employee Union AFGE Files Class Action Lawsuit Against OPM
The American Federation of Government Employees (AFGE) has filed a lawsuit against the Office of Personnel Management to hold the agency and other defendants accountable for the devastating cyberattacks.
The cyberattacks against OPM compromised the personal and security files of some 18 million or so current federal employees and retirees.
The federal class action lawsuit, filed in the U.S. District Court for the District of Columbia, has the AFGE and two individuals, Robert Crawford and Adam Dale, as lead plaintiffs. The class members and plaintiffs include current, former, and prospective employees and contractors of the U.S. government.
The lawsuit seeks injunctive relief, and actual and statutory damages. Other than OPM, the other named co-defendants are OPM Director Katherine Archuleta, OPM Chief Information Officer Donna Seymour, and KeyPoint Government Solutions.
Injunctive relief in this case means the OPM needs to beef up its data security. A statement issued by AFGE National President J. David Cox Sr. and others says that “Even after this historic security breach, OPM has continued to use poor data security practices and inferior private-sector strategies to solve its security woes.”
They are also seeking more information about the data breach. “Despite putting government employees and their loved ones at significant personal and financial risk, OPM has failed to reveal the full scope of who was specifically impacted by the data breach and the extent of the information taken.”
The statement adds that AGFE is working with its federal employee and retiree members to ascertain the breadth of the breach and obtain feedback on OPM’s response.
OPM Director Katherine Archuleta says in a blog post on the OPM website that “I want to personally apologize for the inconvenience, but know that we take very seriously the responsibility OPM holds in securing Federal employee data. Improving OPM’s IT security posture is the utmost priority as we work to recruit, engage, and honor America’s talented and hardworking Federal workforce.”
The class action lawsuit is no doubt rather an unprecedented and extreme step by the largest federal employee union that represents 670,000 federal employees and DC government employees. But AFGE feels that since OPM is unwilling to provide adequate assistance, they have to take this step to gather more information and hold the agency accountable.
It’s a sad commentary on OPM’s operational processes, since their inability to secure data created the problem, and now they’re digging an even deeper hole because of their inability to provide enough data to the affected federal employees.
More OPM Data Breach Related Articles
Cyber ID Theft…How Are You Protecting Yourself? by Gary Fouts
OPM Cyberattack Update – 21.5 Million Social Security Numbers Compromised
Are Hackers Smarter Than The Government’s IT Developers – By Dianna Tafazoli
