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You might have heard in nearly every locale in the nation home prices have soared. Many houses get multiple offers and sell for way more than the posted price. The Veterans Benefits Administration has been tinkering with the 75-year old home loan program to ensure it gives veterans a shot at the house they want. For an update, VA’s Executive Director of Loan Guaranty John Bell III spoke to the Federal Drive with Tom Temin.

Interview transcript:

Tom Temin: Mr. Bell, good to have you on.

John Bell III: Thank you, Tom.

Tom Temin: And just give us a sense of the scope of the program. How much money do you have under guarantee and what’s your entitlement from Congress to be able to offer? How big is this program?

John Bell III: If you put things in perspective of 27 million loans since 1944, that’s totaling over $3.4 trillion. Last year, we set an all-time record for purchases: 444,000 loans. We are about 12-13% market share of any mortgage product out there. So we’ve grown that over the past 10 years from 1% of the mortgage market to, again over 12% of the mortgage market as we stand today. So VA’s had a lot of growth, over 380% over that time period. And we credit a lot of that to changing the processes and procedures that we’ve had, the technology modernization advancements that we’ve had for the program, trying to get the word out about just how strong our veteran borrowers are. And one key characteristic that we change is the mindset. The mindset of this is not just a program that is available as a soft landing for veterans, this should be their product of choice. And by choosing VA over all the other home loan products out there, we’ve been able to really capture you know, a lot of that market share back.

Tom Temin: And just to be accurate, the Veterans Benefits Administration doesn’t loan money, you back loans, correct? That are made by regular commercial lenders?

John Bell III: That’s 100% correct. We have a 25% guarantee. And what that does is it entices lenders, because we carry 25% of the risk for them. So lenders will make mortgage loans. Then they will sell those mortgage loans called mortgage-backed securities. They will sell those in the open market. But this gives an assurity to the entire industry that the government backing of that 25% is going to stave off the faults, which is again, our default ratio is in line with conventional and much less than other agency programs out there.

Tom Temin: So a given borrower with VA backing, then if they had a risk rating to a lender of X, after they are backed by VA, then their rating would drop 2.75 risk or something?

John Bell III: That’s a great way to think about it. That’s pretty much what we do to try to limit cost to the veteran and to the lender that’s lending that money. And then on the back end of it, it’s from the default space. If that loan is going bad, VA is there to help mitigate between the borrower and the servicer so that we can figure out the best option available at that time. So servicers aren’t they’re doing it on their own. They also have the backing of VA to help our veterans make sure that they can stave off some of that financial impact.

Tom Temin: And then rolling up the mortgage portfolios into those securities, do you have any connection to the markets that are controlled by Freddie Mac and Fannie Mae?

John Bell III: I think from a total market share that is correct. From a collaborative space, which is, if you take COVID for instance, we all had to work together to make sure that we stood up the mortgage industry while we went through COVID. So we had to ensure that we could still lend money, even if appraisers couldn’t make it into homes, right, we had to make sure that lenders still felt comfortable, and that they still had the government backing and originating those files. And then also keeping costs down, we were still able to break origination records through 2020-21 and now on to ’22.

Tom Temin: We’re speaking with John Bell, he’s executive director of Loan Guaranty at the Veterans Benefits Administration. And you mentioned that you made some process changes and some back-end information technology updates to make the program, I guess, easier to use for veterans. Tell us about some of those.

John Bell III: Yeah, some exciting things. If you think about VA 10 years ago, and how we would review files, a lender would mail in this file that was probably 300-400 pages thick. And we couldn’t glean any data from those files. We couldn’t share that nationally. So if Wells Fargo was doing a loan in the state of Oregon, and also doing a loan in the state of Washington, we couldn’t compare and contrast what that experience was like. Now we’re able to glean 237 pieces of information, data, from each one of those files we review and then we’re able to scorecard performance of our lenders so that they understand how they’re competing and benchmarking against other lenders. It has improved the overall health of the program, because they’re not only able to see how they’re performing against others, but they’re also able to see why they aren’t performing as well against the rest of the country.

Tom Temin: And what is performance for a lender? I would think, I guess, I presumed you were more worried about the performance of the borrower. But what are some of the parameters of lender performance that you need to track?

John Bell III: So what we require are lenders to at least follow our guidelines. And then lenders because they own 75% of the risk, they can establish or put on additional guidelines on top of ours. And so what we’re trying to understand is, is that additional requirement worth the value of preventing a veteran into the home? And so as we’re able to benchmark what those differences are, and the additional requirements that they have, were able to teach the lender, that value isn’t necessarily getting you the right result. And so that’s the piece that we were missing in the puzzle is being able to go back to the lenders and say, Okay, fine, you want to put a six-month reserve requirement on a loan that’s over $600,000. But the value of performance in that loan versus a loan that doesn’t have that requirement is the same, equal or better. And so while they’re missing out on all of those originations, they’re doing it for the wrong reason.

Tom Temin: And you were able to glean this information from these paper packets, in what manner? Scanning them or digitizing them, or –

John Bell III: No, it’s a wonderful question. So we started with electronic uploads. So they would be able to upload their packages directly from their what’s called the their loan origination system. And then we just switched earlier this year to a true electronic system-to-system transfer of that data. So they no longer have to download a package and upload it. It’s all done electronically. And then at the end of the year, we’re actually moving into our API tech, API’s application programming interface. And it gives us a lot of opportunities from an analytics shareability that we just didn’t have before.

Tom Temin: And what about the aspect of the program that faces the veteran borrowers?

John Bell III: So one of the big key changes are actually two of them, real quick. One is we improve the eligibility timelines. Ten years ago, we averaged about 20 business days in determining what the eligibility of the borrower was just to participate in the program, just to be benefit-eligible. Now, because we do those electronically and instantaneously. Now, 95% of applicants that apply for eligibility are approved in less than three business days. So it has really been a game changer for us in reducing the time that it takes in that process to get a borrower from an applicant to an eligible applicant for lenders. We also have improved our appraisal process. And in November, I actually testified in a hearing in December, but through November, we had 1,500 unassigned appraisals at that time. We just had a huge need for recruiting more appraisers, in particular areas. We had an impending volume of loans coming in. And so we’re at about 1,500 in unassigned appraisals, we’re now down to zero. But we’ve also reduced the time it takes to deliver an appraisal from 11.8 business days down to eight business days, which is honestly in line or better than most other markets out there and loan products. So by fixing those few things, we’ve decreased the timeline that takes to get into a loan, which then allows veterans to compete better when they go to bid.

Tom Temin: Yeah, my question then, has all of this helped veterans in this crazy market where sometimes you have to act fast, or go above the asking price, and not have any baggage associated with your bid for a house in the eyes of the seller?

John Bell III: So last year, we did 444,000 purchases. Wwe’re about 4% off that mark right now. And what we’re seeing is while rates are increasing, and prices in certain areas are stagnating, we’re seeing fewer bids, which are enabling more veterans to be able to take advantage of this time. What veterans were competing against six months ago, eight months ago were cash offers. Most of those offers were from investors that were flooding the market. Now that investor activity has constricted and it’s allowed veterans to compete better. Are we at a spot where we’re saying that we’re done? Of course not. We’ve got to get the message out. The message is mostly being lost to those sellers and the listing agents that really aren’t even accepting agency contracts to begin with. So when they go to list the property, they’re not marking list property available to submit from an agency. And so they’re not even seeing our veteran loan. So we’re hoping to reduce that by working with the National Association of Realtors. We’ve done a couple of videos with them. And then also, we talked to them again this week about getting the message out. And then for us getting lenders and we’re building out a training team to help with establish more materials so that we can combat those issues.

Tom Temin: John Bell is executive director of Loan Guaranty at the Veterans Benefits Administration. Thanks so much for joining me.

John Bell III: Tom, thank you so much for having me. And look, I want to leave you with one thing: If you know a veteran, they haven’t used their benefit, or they haven’t been able to use it because someone tells them they can’t, you’re costing them money. Tell them they’re leaving money on the table.

The biggest monthly drop was in the International Stock Index I fund, which fell from 1.19% in May to -8.21% in June. Although the I fund also dropped in June 2021, year over year it was down by 6.77 percentage points.

The second-biggest monthly drop was in the common stock index C fund, which ended June at -6.55% compared to -1.65% in May. The small cap stock index S fund had a return of -7.95% in June compared to -3.53% in May, and the fixed income index F fund posted returns of -1.94% last month compared to 1.13% in May.

Overall, the TSP was down from a year ago and this year, record inflation has affected many sectors of the economy especially energy and food. The Bureau of Labor Statistics reported that from May 2021 to May 2022, the Consumer Price Index for All Urban Consumers increased 8.6%, which is the largest 12-month increase since the period ending December 1981.

Things are not looking much better in the Lifecycle funds, all of which had declining monthly returns in June. The biggest monthly decrease was in the L 2055, 2060 and 2065 funds which ended at -7.25% in June compared to -0.89% in May. The smallest decline was in the L Income fund, which dropped from 0.04% in May to -1.60% last month.

Aside from the L Income fund, Lifecycle funds have remained in the red since April.

The Supreme Court’s 6-3 decision to overturn Roe vs. Wade on June 24 holds potential ramifications for agency employees across the country, such as the need for some feds to travel across state lines to obtain an abortion.

There are approximately 770,000 federal employees in states that already have abortion bans or are expected to move quickly to enact abortion bans following the decision, according to estimates from the Department of Justice Gender Equality Network (DOJ GEN).

The Office of Personnel Management issued a June 27 fact sheet reminding federal employees that they can use sick leave to get medical care, including time spent traveling to obtain that care.

Additionally, agencies can grant advanced sick leave to employees who haven’t accrued enough — and that applies to travel time associated with sick leave. The policy also covers federal employees taking family members to medical appointments.

“This may include, for example, providing transportation and/or accompanying a family member to a health care provider’s office or to a hospital or other health care facility,” OPM stated.

Although OPM’s reminder did not specifically mention abortion, the federal sick leave policy includes reproductive health services.

But some groups, like the American Federation of Government Employees (AFGE), are calling on the federal government to go beyond sick leave to provide paid administrative leave to cover health care services.

“The federal government, as a model employer, must immediately agree to provide paid leave and cover the travel costs of any federal or D.C. government employee who must leave their state of residence in order to obtain an abortion,” AFGE National President Everett Kelley said in a June 25 statement.

Relying on the existing sick leave policy will “disproportionately harm women and other employees who need to travel for abortion care,” Stacey Young, the president of DOJ GEN, told Federal News Network.

The group describes itself as an “employee-run organization” with 1,150 members that has advocated for gender equity and equality at the Justice Department since 2016.

“You shouldn’t have to use more sick leave now that states are banning abortion,” Young said. “The federal government can mitigate the harm by allowing employees to use administrative leave for travel, which will not require employees to dig into their limited sick or annual leave more than they already need to. The government can also pay for public servants’ travel, in same way that private employers across the country are already doing.”

Young also pointed to how agencies provided employees with additional paid time off so they could get vaccinated against COVID-19.

“We think that the administration would need to figure out how employees could request administrative leave without having to disclose their need to an immediate supervisor or someone else in their office,” Young added. “Privacy measures are paramount when it comes to reproductive health care.”

The White House did not respond to a request for comment on whether it was planning to provide federal employees with additional paid leave and covered travel expenses.

There’s another caveat that affects federal workers seeking to obtain abortions: Currently, the Federal Employee Health Benefits (FEHB) Program does not cover the cost of abortion services.

But that’s something House Democrats are trying to change. The House Appropriations Committee’s fiscal 2023 financial services and general government bill includes a provision that would remove the FEHB ban on abortion coverage.

Although House appropriators included the provision in the draft spending bill last year, too, it didn’t make it into the final version. The committee approved the 2023 spending bill on June 24, but it still has to make it through both the full House and the Senate, which could mean more revisions to the legislation.

Lawmakers will likely need to overcome the Hyde amendment to remove the FEHB ban on abortion coverage. The Hyde amendment is a standing legislative provision that bars the use of federal funds to pay for abortions, except in cases that endanger the life of the patient, or if the pregnancy arises from incest or rape.

Meanwhile, Young from DOJ GEN said the Hyde amendment should not be a factor in providing paid leave and covering travel expenses for federal employees seeking abortion services.

“For decades, the Hyde amendment has placed undue obstacles to federal employees’ access to reproductive healthcare,” she said. “But under its plain language, ancillary expenses that don’t actually pay for an abortion itself aren’t covered. So providing money to fund administrative leave, or even directly paying for employees’ interstate travel, I don’t think that would in any way run afoul of the amendment.”

Federal health care workers

Along with federal employees who may decide to obtain an abortion, agency leaders are also offering some guidance for federal healthcare workers. Attorney General Merrick Garland said the Justice Department is working to protect federal employees who provide reproductive services that are allowed under federal law.

“Federal employees who carry out their duties by providing such services must be allowed to do so free from the threat of liability. It is the department’s longstanding position that states generally may not impose criminal or civil liability on federal employees who perform their duties in a manner authorized by federal law,” Garland said in a June 24 statement. “The Justice Department is prepared to assist agencies in resolving any questions about the scope of their authority to provide reproductive care.”

The Department of Veterans Affairs, which employs some of the government’s reproductive health care workers, said it is continuing healthcare operations consistent with legal authority.

“Access to gender-specific reproductive health services, including contraception and fertility services, is and will remain a critical component of veteran health care,” VA Secretary Denis McDonough said in a press statement. “VA will work with DOJ to ensure the full strength of the federal government is available to defend eligible VA employees if necessary. Our commitment to providing reproductive health care to the veterans we serve is unwavering. We recognize this is a rapidly evolving landscape, we are monitoring the situation closely and will remain in close contact with you.”

Stuff happens. And when it does, the steady-as-she-goes investment advice often makes less sense than it did in better times. For many people, dating back to World War I, Treasury securities have been a steady part of their personal financial planning.

For workers under the FERS retirement program, the TSP could supply anywhere from one-third to half of the income they have in retirement. Unlike their annuity, and Social Security, the TSP is not protected from inflation. But many experts say that in addition to fully funding their TSP, feds should consider other super-safe options to pad out the nest egg. Millions of people still have paper certificates. But bonds are now also electronic. And the bonds are an even better deal.

One such option is a treasury bond suggested by financial planner Arthur Stein in March. At that time it was paying 7.1%.

More recently, the Washington Post’s Michelle Singletary told feds how to get a Treasury security paying 9.62%.

Then there are also more traditional savings bonds as a nest-egg booster. Retiree Abraham Grungold, a very successful TSP investor, is now a full-time financial coach. Among other things, he’s been helping feds and retirees who had — and lost — actual paper bonds with how to get their money back. It’s a big problem, especially with older investors whose only option at the time was the paper trail. Fine, until they lost track of them. Then what? Here’s what he recommends:

For many, savings bonds have been a part of our lives. We have purchased and or received them for the birth of a child, wedding gifts, saving for college, and saving for retirement. Historically, you purchased them at your local bank and received a paper bond from the Treasury Department. For the past few years, the method to purchase savings bonds can only be transacted through the Treasury Direct website.

In the past, federal employees participated in the U.S. Savings Bond Drive and purchased bonds through their payroll allotments. I purchased bonds during my 36-year federal career and even recently in retirement. I started with 50 and 100-dollar bonds. Then I moved up in denominations, because it was easier to accumulate larger size bonds instead of a lot of smaller ones. I owned dozens of them. I kept a detailed list of them. Over the years, I cashed in many of them if I needed to make a major purchase or once they matured after thirty years. At maturity, the bond will stop accruing interest. Once you cash them in, you must pay federal tax on the interest earned. The IRS will send you a 1099.

Recent reports have shown that there are unclaimed savings bonds valued at approximately $25 billion. These matured bonds have never been cashed and no claim has ever been made by a beneficiary. And what happens if you lose the paper bonds? I had a client who contacted me about their lost bonds. They lost 72 paper bonds. The total value was approximately $694,000. It took me eight months dealing with the Treasury to have all of them recovered back into the hands of my client.

So why did it take so long and what do you need to be aware of?

Starting the process

You first need to start with a FS Form 1048 Claim for Lost, Stolen, or Destroyed United States Savings Bonds. The Treasury assigns you a case number, and then the many hurdles and challenges begin. Some of the following issues require specific forms and need to signed and notarized.

Owner

The Treasury needs to identify who is the owner of the bond. It may have only one owner, co-owners or the bond may have been gifted to someone. This is a critical issue.

Verification

If the bonds are lost, a search is performed on the owner’s Social Security Number. On paper bonds, if the SSN was incorrectly typed on the bond, that means that the bond is unverified. The only way to verify a bond without the correct SSN is with the bond’s full serial number. A closer review of the bond would then need the owner’s name. My client had 12 bonds valued at approximately $100,000, and the Treasury stated that they were previously cashed. We had the full serial numbers, so the Treasury did a separate search and found all 12 bonds which were then verified as not yet cashed. If you do not have the full serial number, then the bond may be lost forever.

Reissued and Matured Bonds

Bonds which are verified can be reissued to the owner in a Treasury Direct account. The Treasury will not reissue a paper bond. If a bond reached the full maturity of 30 years, then it cannot be reissued; it has to be cashed out and the proceeds are given to the owner. My client had 48 fully matured bonds and 24 reissued bonds. In the event these 72 paper bonds resurface, they cannot be cashed.

Communication

Although the steps sound fairly straight forward, the Treasury is short staffed and overwhelmed with these requests. Contacting the representative assigned to the case is a frustrating challenge. Due to security issues, you are not provided with their last name, you cannot leave a voice mail, you cannot send an email, and no texting. Wait times to speak to another representative are 90 to 120 minutes. Regular mail takes weeks to process due to the COVID-19 protocols. I found the best way was to send a fax with the case number and it reached the case representative quickly. The follow-up to the fax was either a phone call or an email from the Treasury representative.

My presentation of the 72 bonds and my calculations were accepted by the Treasury representative without any challenge. The successful outcome was that my client received every dollar owed to them, but that was largely due to the record-keeping they maintained over 30 years. My suggestion to anyone attempting this on their own is to be patient, tenacious and keep a chronological log of the steps you have taken along the way. You want to keep a copy of the records mailed and or faxed.

Nearly Useless Factoid

By Daisy Thornton

Source: Scientific American

If you are working, retired, building a nest egg or living off one, these are tough emotional times. If you want good news, you’ve learned to avoid the financial news or stock market reports. Also national news, international news and, if you are a baseball fan in certain cities like Washington, D.C., you avoid the sporting news, too.

Hopefully you have a good cable package and a personality that lets you sort and live with the good news vs. the not-so-good-news. Which is the purpose of today’s Your Turn radio show: It’s a double-header on the good, the bad and the ugly. We are going to try to cover the waterfront. Our show begins at 10 a.m. EDT on www.federalnewsnetwork.com or 1500 AM in the Washington-Baltimore area. First up, financial advisor Arthur Stein will talk about the future course of your TSP account, and the pros and cons of investing heavily in the never-has-a-bad-day G fund. Many consider it the “safest” investment. But that begs the question: How do you define “safe” when building a retirement nest egg? Federal News Network reporter Drew Friedman will talk about the very latest on the federal pay raise. Then we’ll get into the prospects for a large retiree COLA. Last, but definitely not least, the issues TSP investors are having with the new system.

Hopefully this has something for everyone. Here’s a preview from Arthur Stein on the place of the G-fund in your TSP portfolio:

There are two advantages to the G-fund: Zero volatility and all holdings are guaranteed by the government.

However, G (and F)-fund investors need to recognize that, historically, long-term investments in the G and F-funds lost purchasing power. G-fund annual returns have gradually declined since it was introduced in April of 1987. In 2021, the return was 1.4%, 84% lower than in 1988. The cost of living (inflation) more than doubled over this period.

That leaves TSP participants with a dilemma. Should they invest for:

• The lower volatility and lower chance of losing principal (“safety”) offered by the G and F (bond) funds, and accept the higher chance of declines in purchasing power; or
• The higher potential growth historically offered by the stock funds, accepting higher volatility and market declines for the opportunity to increase purchasing power?

Nearly Useless Factoid

By Daisy Thornton

Source: Sci News

The board, which hosted its first public meeting since a major TSP system update, said on June 28 that there have been some improvements, like a slight decline in wait times for customer service. But participant frustrations and call hold times are still much higher than usual.

To help alleviate the heavy call volumes, the board increased its customer service staff by 66%, up to 800 total representatives at ThriftLine, TSP’s customer service call center.

“That’s the most that we’ve ever had in the history of the TSP,” Tee Ramos, FRTIB’s director of participant services, said at the board meeting. “Our volumes continue to be historically high, though, so we’re working with our vendor to continue to add staff.”

Ramos said the board plans to add another 100 representatives in the next week, as many of the issues have still not been resolved.

The announcement comes after the board updated TSP with a new recordkeeping system, a mobile app, an e-signature function, an optional mutual fund window, among many other changes. After the launch on June 1, TSP participants vented almost immediate frustrations about technical issues and missing account information. Many participants also struggled to log in to the new My Account system. As a result, more TSP participants tried to reach customer service representatives, yielding unprecedented call volumes and hold times at ThriftLine.

Ramos said despite the challenges, the update was necessary because the old system for TSP was outdated. The board was also looking to enhance security and anti-fraud protections for participants.

“Recordkeeping processes are labor intensive. Those services that we had in the past were delivered through legacy technology that made it difficult for us. Our existing technology and infrastructure was not agile and it was not scalable,” Ramos said. “We as an agency wanted to focus more on continuing to provide a top-tier service, ensuring we had a service that was comprised of an agile and scalable IT infrastructure and focusing our FRTIB staff on improving retirement outcomes and the participant experience.”

But many participants continue to voice frustrations, such as the inability to see beneficiary designations in the new account system. Ramos said that issue was a data quality issue for some users.

“We had roughly 266,000 beneficiary accounts where we didn’t transfer their designation over to the new system. This wasn’t an oversight,” Ramos said. “It was due to the quality of the data in our old system. We weren’t confident that it would transfer well from the old system.”

The board has beneficiary forms available for the accounts with missing information, and a process to follow to get those designations, Ramos said. All participants should review their beneficiary information and update it online.

Another common concern was the lack of access to historical financial data going back further than 10 years. Again, Ramos said, the lack of data available in the system is deliberate.

“We looked into historical data usage trends, and there was low usage and high cost associated with maintaining high availability for the 665 million documents that we had online with our old system. There are also [security] concerns about maintaining that amount of data,” Ramos said. “Participants are able to access year-to-date employee contributions and we have 10 years of account balance information that transferred over. That didn’t transfer over on day one, but it is up and live now.”

Historical information has all been transferred, the board said, but it is not readily available in the new My Account. If participants want to obtain additional statements, documents and other messages from the prior system, they are available upon request.

Still, many participants continued to share frustrations about the update. Beyond those frequent concerns, many users also said the new system is unintuitive and difficult to use. In an exclusive Federal News Network survey, respondents said the new TSP interface lacked calculation tools that were available in the old system, and said it was more difficult to find account information.

The challenges are garnering attention on Capitol Hill, too. Congresswoman Eleanor Holmes Norton (D-D.C.) requested an “urgent meeting” with the board to discuss the issues and get an update on the progress of solving them.

Norton previously wrote a letter to FRTIB, calling on the board to explain the cause of technical issues, unprecedented customer service hold times and missing financial information. The board responded to Norton’s letter, saying that they’re making progress to resolve the issues. But Norton said the board’s response did not fully address her questions.

“The Thrift Savings Plan is so essential to federal employees and retirees that FRTIB must immediately fix the problems with the new online system,” Norton said in a June 27 statement. “Constituents have told me of phone wait times of over nine hours, of disconnected calls, and of missing and incorrect information in their accounts.”

The board has not yet responded to Norton’s meeting request.

During that early 2000s super Bear Market, millions of investors lost billions of retirement nest egg dollars. The stock market plunged almost 50%. A heart-stopper for most investors. Especially if they are close to retirement, and even more so if already retired on a fixed pension. Many moved their TSP and 401(k) into “safer” bonds or treasury securities to protect them from losses. But they missed out on the stock market rebound.

Many private sector employees were also forced to take pay cuts ranging from 5-25% in order to protect their jobs. And some companies — including several well-known investment management giants — stopped giving their own employees matching 401(k) contributions, so they could stay afloat. Federal workers did without pay raises for two years. But there were no recession-triggered layoffs. In fact, many agencies grew. The TSP continued to give investors a matching government contribution of up to 5%. Further proof that it’s nice to be in a plan that covers members of Congress too. And workers with enough time in service continued to get WIGs (within-grade raises) worth about 3% every one, two or three years based on their time in government.

Benefits expert Tammy Flanagan said don’t focus entirely on the next recession, whether it is two years, or two weeks, away. Her advice: “What about the next recession. And the next few recessions? Be prepared because it is always something: War, recession, the roof of your house caves in. Always something.” Her advice, particularly for people who are retirement eligible or close to retirement is: Think about waiting. Maybe a delay of two years. In an earlier column, she pointed out that an $80,000 per year fed who works an extra two years — from 60 to 62 — will boost their starting annuity by almost $30,000. That’s also important because while CSRS retirees get full cost of living adjustments no matter when they retire, FERS retirees don’t get any COLA until age 62. Then it’s minus 1% if inflation exceeds 3%. Currently it is running much, much higher. So are you ready? For retirement, the next recession, or both? The Employee Benefit Research Institute says many retirees — federal and private — are not well prepared for retirement. Among other things it says:

• Many retirees say they wish they’d saved more. They may seem obvious but by the time you’ve learned that lesson it may be too late.
• Also, most retirees seem to do better if they have a financial advisor, though many don’t. Or didn’t until later.
• The EBRI also says that 9 out of 10 retirees who have financial advisors feel the value they got “outweighed the cost” of such an advisor.

Nearly Useless Factoid

By Daisy Thornton

Source: World Wildlife Fund

The fiscal 2023 financial services and general government bill, which the House Appropriations Committee advanced on June 24 in a vote of 31 to 22, makes no mention of the pay raise proposal for federal employees.

Similar to their silence last year, House appropriators’ lack of comment on the federal pay raise essentially endorses the White House’s 4.6% proposal from March’s budget request. In 2022, federal employees received a pay raise of 2.7% on average.

Military service members would also receive a 4.6% pay increase under the legislation. The White House did not specify locality pay in the across-the-board increase for 2023.

Democratic House lawmakers, though, are pushing for an even higher 5.1% pay increase for federal employees.

A lot can still change, though, between now and the start of the next fiscal year. For instance, the Senate would still need to approve the spending bill for the pay raise to become official.

The House Appropriations Committee also looked at funding requests for agencies including the Office of Personnel Management, Office of Management and Budget, General Services Administration and more.

In particular, spending for OPM includes a requested increase of about $70.9 million over the enacted level for 2022. That funding would in part go to heightened oversight and transparency for the agency’s retirement services, a program that faces ongoing processing delays and call center challenges.

Federal organizations like the National Active and Retired Federal Employees (NARFE) Association support the language about retirement services that the bill highlights.

“We hope this increased attention will elevate the urgency of the administration’s efforts to solve these problems,” NARFE National President Ken Thomas said in a June 24 statement. “We understand OPM may be struggling with pandemic-related disruptions and that there are dedicated public servants at OPM retirement services who recognize the problems. But they must prevent the situation from deteriorating further and start making real progress to improve and modernize their processes to better serve those who spent careers serving their nation.”

OPM Director Kiran Ahuja said at a June 23 press conference that she’s focused on improving retirement services. For example, the agency is currently piloting an online application for feds looking to retire.

The committee members also pointed to the President’s Management Agenda goal of strengthening the federal workforce, saying the funding request would support many of the White House’s workforce initiatives.

“This multi-year strategy includes dedicated investments to attract and hire the most qualified employees, including developing a diverse and competent workforce, improving federal hiring processing and identifying human capital needs of the federal workforce,” the committee wrote.

The funding would reduce barriers to federal employment and delays in the hiring process, through information technology modernization, more telework guidance and programs to support reentry to the civil service for those who previously left a federal position, the committee said.

The bill would also remove a ban on abortion services under the Federal Employees Health Benefits Program, a point over which several House Republicans voiced concerns.

Additionally, the Executive Office of the President would receive $4.5 million to pay White House interns. That comes after the Biden administration announced earlier this month that it will start paying its interns this fall.

The bill gives OMB $12 million above its enacted level for 2022, while the Office of the National Cyber Director would receive $22 million in funding to continue standing up an office for coordinating federal cybersecurity policy.

GSA would also get $100 million to fund electric vehicles in an effort to reduce the impacts of climate change, which is an ongoing priority from the Biden administration. The agency would get another $100 million for the Technology Modernization Fund.

Similar to last year, the bill funds GSA with $10.5 billion for the Federal Buildings Fund, which includes $380 million for the Department of Homeland Security headquarters consolidation at St. Elizabeths and $500 million for a new Federal Bureau of Investigation headquarters.

To support increased access to records documenting underserved and underrepresented communities, the National Archives and Records Administration would receive $2 million above the President’s request for a total of $452 million.

Notably, the bill would also make permanent a provision from last year that requires more transparency on apportionment of appropriations. The provision would mandate OMB to make its appropriations publicly available in a timely manner.

Another section of the bill aims to improve budget execution, which would “require budget authority be made available prudently for obligation, executive agencies to provide budget and appropriations information to the Government Accountability Office promptly and agencies to notify Congress of certain delays or restrictions in apportionment of appropriations,” the committee stated.

One other new provision tries to create a commission to recommend name changes or removal of federal property that’s “inconsistent with the values of diversity, equity and inclusion,” the committee wrote.

So for an update, we went to Kim Weaver, the director of external affairs for the Board. We had the questions, she provided the answers.

Nearly Useless Factoid

By Daisy Thornton

Source: Smithsonian Magazine

The temporary raise comes as the departments of Agriculture and Interior and the U.S. Forest Service — agencies that employ federal wildland firefighters — face rising recruitment and retention challenges for the frontline positions.

The salary increase for about 15,000 federal firefighters is funded with $600 million under the Infrastructure Investment and Jobs Act, commonly known as the Bipartisan Infrastructure Law (BIL). Federal firefighters will receive a bump to their biweekly pay starting July 3, up by either $20,000 or 50% of their annual base salary, whichever number is lower.

“Hiring and retaining firefighters in increasingly long and complex fire years is a challenge that we take seriously. The President’s budget and Bipartisan Infrastructure Law provide a significant down payment towards investments in the stable, professional and permanent wildland firefighting workforce we need to confront the wildfire crisis,” USDA Secretary Tom Vilsack said in a June 21 press release.

The temporary pay increase will also incorporate retroactive pay going back to Oct. 1, 2021, the administration wrote in a June 21 fact sheet.

A provision of the BIL initially paused the raise’s enactment, which required USDA, DOI and the Forest Service to analyze and implement the pay increase only in areas where it’s difficult to recruit or retain firefighters. Ultimately, the agencies determined that the raise will apply to “every geographic area,” a June 21 FAQ page stated.

The temporary raise will last through September 2023, and builds on President Joe Biden’s executive order last June, which increased the base pay for all federal firefighters to at least $15 per hour.

Many federal unions and organizations voiced their support for the pay raise. The National Federation of Federal Employees, the union that represents a majority of federal wildland firefighters, said in a June 21 press release that the announcement will go a long way to help agencies hire and keep workers in those positions.

“There has been a serious recruitment and retention problem for wildland firefighters at federal agencies this year. Firefighters simply could not make ends meet on the hopelessly low salaries offered at federal agencies, so jobs were becoming very difficult to fill,” NFFE President Randy Erwin said. “For wildland firefighters, the additional income will give them the opportunity to pay for housing, childcare and other everyday necessities.”

The changes for federal firefighters include more than just a pay raise, though. The BIL funding will also support a mental health program for firefighters.

Additionally, the Office of Personnel Management, in partnership with the Forest Service and DOI, created a new wildland firefighter occupation series —something that has not existed in 50 years. OPM announced on June 21 that the occupation series defined new position descriptions for wildland firefighters.

OPM said the occupation series will support more equitable compensation and a better work-life balance for federal firefighters. In line with other recent efforts from OPM, the job postings will also call on agencies to focus on a skills-based approach when considering applicants. Federal firefighters can opt in to the series, and the new information will let agencies post more specific job opportunities with a clear career progression.

In contrast, the previous approach folded all firefighting jobs into one broad job description, making it difficult for federal wildland firefighters to understand a path for advancement, OPM wrote in a June 21 announcement.

“The new standard is an important step toward recognizing and valuing the wildland firefighter workforce,” OPM wrote. “The clarity on career progression will also support better retention. Wildland firefighters will be able to readily understand the career path and the expectations and requirements for promotions.”

The new occupation series, along with the pay raise, will help long-term efforts to improve federal firefighting positions, said OPM Director Kiran Ahuja.

“These are important steps that will provide a solid foundation for recruitment, retention and further strengthening our wildland firefighter workforce,” Ahuja said in a statement.

“For decades, federal wildland firefighters have faced the challenges of longer, more severe fire years with pay that has lagged behind their counterparts,” the White House wrote. “These measures are a significant step forward that will deliver an immediate, temporary pay raise to federal wildland firefighters across the nation, and sets federal agencies on a path to continue working with stakeholders towards an updated, competitive and equitable pay structure, along with a support system that will address the many challenges that have plagued our wildland firefighter workforce for decades.”

On Capitol Hill, lawmakers are also pushing forward on legislation to help federal firefighters receive better health benefits.

The Federal Firefighter Fairness Act would create the presumption that certain illnesses and disabilities are the result of on-the-job duties for federal firefighters, making them eligible for workers’ compensation.

The Senate Homeland Security and Governmental Affairs committee approved the bill on May 25, following the House’s passage of partnership legislation on May 12 in a vote of 288 to 131. The full Senate has not yet voted on the bill.

When is the last time you and your significant other took a romantic weekend to rekindle the fire? And spent most of the time, at the beach or in the mountains, talking about the pros and cons of an irrevocable trust?

Wild guess: How about … never?

Although vitally important in some cases, irrevocable trusts are sort of like heel spurs or picking kitchen paint colors as a topic of extended conversation. And yet …

There may come a time in your family’s life when having the should-I-have-a-trust conversation is critical. Whether you did it, or especially if you didn’t do it but should have!

All this is a sneaky way to lead into today’s Your Turn radio show. And while the subject doesn’t automatically draw your attention, in many cases it should. What such a trust is, and whether it is vital or useless for you and yours is something you have to deal with while you are still around. It won’t wait until after you’ve gone and mourning — maybe fighting — loved ones are dealing with your estate which, by the way, even the most modest feds have. Today at 10 a.m. we’ll be talking with Tom O’Rourke, a Washington area tax and estate attorney. Many of his clients are current or retired feds. Some need a trust. Some should avoid it. So how do you know? Here’s Tom’s explanation of what it is, and why you may need one. Or not. The show is at 10 a.m. on federanewsnetwork.com or 1500 AM in the D.C.-Baltimore area. The show will be archived on our home page so you can listen anytime or refer it to a coworker. If you have any legal questions about wills or trusts send them to me before showtime: mcausey@federalnewsnetwork.com

Irrevocable trusts are commonly used as part of a comprehensive estate plan, but they are not for everybody. They have significant tax and legal consequences and should only be entered into after considerable thought and with the guidance of a knowledgeable advisor. Once an irrevocable trust is signed and funded, it cannot be revoked or changed.

Irrevocable trusts allow you to accomplish several important goals. They can be used as a tax-planning tool, they can provide a vehicle for managing assets for the benefit of a person who is not capable of managing their own assets, and they may be used to protect assets from the claims of creditors.

Some of the more common tax planning trusts include a life insurance trust, a QTIP trust, and various types of charitable trusts. For many individuals, however, tax planning is no longer an issue. The federal estate tax exemption is now $12 million per person. Many states either have eliminated their estate tax, or have significantly increased the exemption amount.

Irrevocable trusts are also commonly used to accomplish non-tax goals. Some of the more common irrevocable trusts include a trust for a minor child, an education trust, a special needs trust for a handicapped adult child, a trust to protect an inheritance for a spendthrift child, or a trust to protect a child’s inheritance in the event of his or her divorce.

Irrevocable trusts also have a number of disadvantages including the following:

1. You must irrevocably give up the right to control the assets transferred to the trust.
2. It is a separate tax and legal entity and it is advisable to seek guidance from a knowledgeable advisor to make sure you are not falling into a tax trap.
3. It is often more expensive than using other less complex estate planning tools.

While irrevocable tools are certainly available to help you accomplish your estate planning goals, they should only be used after you have considered all advantages and disadvantages, and had the benefit of professional guidance.

-Tom O’Rourke

Nearly Useless Factoid

By Daisy Thornton

Source: Amusing Planet

Consider:

If you get invited to enter the Kentucky Derby, bring a horse.

If you want to make butter, a Jersey cow is the way to go.

To the untrained city slicker’s eye cows and horses are pretty much the same. But in fact they are very different. And that same big differential applies to pay raises vs. cost of living adjustments. Two very different things. And that difference can be critical in a time like now when inflation has taken off, prices for everything are going up and prospects for the future are dim. If you are still working, but eligible to retire, is this a good time? Because of the diet-COLA feature for FERS retirees a long period of inflation can eat into the buying power of an annuity. And if you are eligible or close to retiring this year or next you need to do some homework.

Most federal workers are looking at a minimum 4.6% pay raise in January 2023. Congress might even boost it to 5.1%. Depending on how the political winds blow between now and November.

The amount of the retiree COLA is to be determined but right now it looks like a minimum of 8.6%. But it could be more, or less, depending on what path inflation takes between now and September. That would mean an 8.6% increase for Social Security and CSRS retirees but “only” 7.6 for FERS retirees. That’s a lot. It would be the biggest in years. But its going up because prices are too. And the system used to measure inflation doesn’t take into account many of the added costs of older, retired people. Solution: Maybe you should defer your retirement a couple of years.

Benefits expert Tammy Flanagan says someone making $80,000 a year can boost his or her starting annuity by $30,000 by working just two more years. That’s a nightmare prospect if you hate your job, boss, coworkers or community. But its money in your pocket for life, if you hand on. And it’s linked to inflation. Here’s the example showing the magic of deferring your retirement, especially during a time of skyrocketing inflation:

• Length of Service at age 60: 19 years

  • 19 x $80,000 x 1% = $15,200 x .90 = $13,680 (10% reduction under the MRA + 10 retirement because employee didn’t have 20 years of service at age 60 to qualify for an unreduced retirement)

• Length of Service at age 61: 20 years

  • 20 x $80,000 x 1% = $16,000 + $12,000 = $28,000(The extra $12,000 represents a FERS supplement of $1,000 a month payable to age 62 when retiree could file for SSA and get an even larger SSA benefit based on their lifetime of FICA taxed wages)

• Length of Service at age 62: 21 years

  • 21 x $80,000 x 1.1% = $18,400 + $24,000 = $42,480(The $24,000 represents the SSA benefit payable at age 62 of $2,000 a month from their lifetime of FICA taxed wages)

The difference between this person leaving at 60 vs. 62 is almost $30,000 a year more income for only two more years on the job. Of course, at age 62, the person who left at age 60 could claim their SSA benefit, but the gap would still be close to $5,000 a year or $600 a month in their FERS basic retirement benefit for life! In addition, they would have benefited from two more years at their presumably highest earning years added to their SSA record, and two more years of contributions and growth to their TSP accounts. A win-win, for many. –Tammy Flanagan

Nearly Useless Factoid

By Daisy Thornton

Source: Wikipedia

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Last month, the House passed a resolution that helps pave the way for its staff members to unionize. The measure essentially grants House staffers the same legal protections other federal employees have against retaliation if they do try to formally organize a labor union. Backers say it’s needed in part because of low pay and high turnover on Capitol Hill. But not everyone thinks it’s a good idea, including Suzanne Bates, a senior writer and researcher at Americans for Fair Treatment, a group that calls itself a union watchdog. Bates talked about what she sees as the downsides on the Federal Drive with Tom Temin.

Interview transcript:

Suzanne Bates: This is a new thing, organizing political staffers. We’ve seen it in some campaigns. And now we’re seeing it in some state legislatures. And then Congress is kind of the big prize, I think, at the end. And so our concerns are that this is already a very political space. Unions are political organizations. They spend a lot of money on politics, including elections and lobbying, $2 billion by their own accounting last year. So I think this is just going to make Congress more political than it already is. And it may lead to some unhappy staffers, not to mention members of Congress.

Jared Serbu: We don’t have a lot of experience with unionizing among members of legislative bodies. But there’s plenty of experience at the agency level. A lot of those folks are in our audience right now listening, and I think they would probably bristle at the idea that membership in a union is affecting their work or influencing their work decisions. So what’s the evidence that this would be a problem in the legislative branch?

Suzanne Bates: Sure, we’re already seeing, I mean, we’ve seen unions in federal and state agencies trying to use their positions to gain a foothold on policy issues. The latest example is the American Federation of Government Employees. One of their locals that represents EPA employees said that during collective bargaining, they plan to ask for a climate emergency declaration by President Biden. That’s, I mean, that’s not what we traditionally think of as collective bargaining, right? We think of it as being just about what the employee needs, their benefits, their pay, their working conditions. So when you add in sort of the public sector, it adds another layer of politics, and it becomes more complicated. And especially if you see something like that, where a union that represents people, members of the bureaucracy asked for an actual policy change in collective bargaining, what does that mean, for Congress, right, where you’re already talking about political staffers? There was sort of this idea that there was a dividing line between people who work for agencies, like you said, and then people who worked in political offices, because, members of Congress, members of state legislators need to be able to be more nimble, perhaps in their hiring and firing decisions. This is going to change that. I mean, we really don’t have that much experience with seeing unions in a politicized environment like this, it’s going to be very different, I think, than what you see at the agency level.

Jared Serbu: And the EPA example, you just used, I can totally understand, disagreeing with the position the union took, there in negotiations. And EPA is free to say, “You’re crazy. We’re not doing that. It’s not your position to make that request in the first place.” But it’s hard for me to get from there to public employees should therefore not have the right to organize. Draw that connection a little more closely, if you could?

Suzanne Bates: Yeah, no, I’m not saying public employees should not have the right to organize. And especially, I mean, again, at the agency level, I think we have a history of that now, we’ve seen sort of how it plays out. I do have some concerns. I mean, we work with public employees who’ve been harmed by their unions in some way. And so in a public environment, it changes the dynamics a lot, because you’re talking about people who can help elect the people who they’re bargaining with, right? And so it just changes the dynamic versus a private sector environment where you’ve kind of got this natural tension between the bosses and the workers, right. It’s just a different environment in the public sector. But we’re not saying you shouldn’t unionize the public sector. But I do think, again, the political staff, it’s just a next level. So what happens if you don’t like what your boss is doing? Do you threaten to primary the member of Congress? Do you spend money in a primary? I mean, we already know that unions do spend money in primaries trying to get rid of, or at least they fund organizations, for example, the Working Families Party, which is mostly Union funded. Primaries, members of Congress and members of state legislatures that are, who are not progressive enough for them. So what kind of bargaining chip does that create in Congress, right, where you’re talking about your boss is a member of Congress. And so are you going to use that leverage? I just think it raises questions and concerns that don’t exist again, at the agency level.

Jared Serbu: In the legislative branch, I want to address the issue of referring to these folks as political creatures. Some of them certainly are. I mean, you’ve got tons of examples of legislative assistants and communications directors, et cetera, et cetera, moving back and forth between the campaign and the congressional office. There’s a lot of people too, though, that spend their time on policy stuff, especially at the committee level. Could you could you solve some of the concerns that you have by, I don’t know, narrowing the right to unionize in some way so that people who are more directly involved in the political side of things are restricted? Or let me broaden the question out even further, is there anything in this House resolution that you would change to solve some of the concerns that you have while allowing some kind of organizing?

Suzanne Bates: Well, so we don’t know yet what the scope of collective bargaining will be. And so that wasn’t addressed in this resolution. So there’s still so many unanswered questions. So I mean, there’s some idea that we won’t see bargaining over wages or benefits. So what will they bargain over? So I think if you have a very narrow scope, then potentially, but maybe something besides like, unions, again, are just such political organizations at this point, and where we are in America, that I just can’t picture introducing unions into the legislature and not having them create more tension and a more deeply partisan political atmosphere. So like, you’re talking about the committee staff versus an office staff, right. They’re also hired by political parties to run those committees. It changes, depending on who’s in control of the of the legislature at that time. So they’re political, I mean, that’s their function. Their function is to answer to political partisan members of Congress. And so what will it mean to introduce, again, a deeply partisan political organization into that dynamic? Will it change, if the Republicans take control of the House, will the unions not be invited in anymore? I mean, I think there’s just so many questions that are still unanswered about how this would even work.

Jared Serbu: The main rationale that’s been offered for why this needs to happen is really around wages. Congressional staff wages are incredibly low for the market that folks are expected to live in there. Are there other ways to solve that problem besides unionization?

Suzanne Bates: Yeah, absolutely. Well, that’s, I think, really the wages were really terrible. The fact that they had to set a floor at $45,000. And that’s gonna raise a lot of people’s salaries, just tells you that it’s kind of considered a stepping stone right to other jobs that pay better. It ends up being a lot of sort of young staffers, but I mean, I think most people think they deserve a fair wage, right. And unions are one way to get there. That’s what the unions want. But again, are they even going to be able to bargain over wages? That’s not even determined at this point. So are there other ways? Yeah, look, they just got a raise without unions, right? They kind of publicly went out there. They have these Instagram accounts that people have created to air some of their grievances. It sounds like some sexual harassment problems are a real issue in Congress. I think we’ve known that for a long time. There probably needs to be a better way to deal with those. But I think when they take these things to the public, especially this press, there’s so much media around them. And they’re, I think, really interested in what’s going on on the Hill. They have a sympathetic audience. And they’ve clearly been able to put pressure on their bosses and they’ve gotten a raise. And I think that that can happen again. Unions are not the only way to do this.

Jared Serbu: Suzanne Bates is a senior writer and researcher at Americans for fair treatment. You can find his interview at Federal News network.com/federal Drive

Nobody has to invest in any of the new funds being offered. And only those who do invest part of their optional retirement fund will pay new fees. The rollout — involving 6 million accounts — has been rocky for some. Smooth for others. The new choices are a blessing to many investors while confusing to others. An early 80s retiree from the Nuclear Regulatory Commission said, “If I were younger, I would object to so many because some of them could be weak and go under. Adding another 10 or so would be good. However, I have been withdrawing from the TSP for years, so don’t much care anymore… I sold most of my fund holdings in December, which turned out to be near the top of the market.”

The rollout of the TSP has been bumpy as reported by Federal News Network’s Drew Friedman. So what’s next? Should you embrace the new investments, stick with what you know, or what? For the for-what answer, we turned to, Abraham Grungold. He’s a long time fed, recently retired to a new career as financial coach. He’s a member of the TSPs self-made Millionaire-plus club. Here’s what he said to the complicated  question, is the new TSP right for you?

I have been a TSP participant since the beginning. I have taken advantage of all the benefits that the TSP has to offer. And the TSP has made me successful beyond my wildest dreams. The TSP has a track history of over 30 plus years and it has made many millionaires. The TSP members have desired more investment options and great flexibility.

What are my thoughts on the new TSP? For me I like no frills. What makes me happy is quality, a good price and performance. It reminds me of the car that I drive, a Toyota Camry. It starts up every morning, requires little maintenance and I purchased it a great price. That is how I want my TSP website to work for me. The ability to log in every morning with ease, require little effort on my part to keep up and I want my expenses to remain the lowest in the retirement industry.

The 5,000 new mutual funds offered by the TSP reminds [me] of when my daughter would ask me to get her the new Oreo mint or double fudge cookie.   I go to the supermarket and view all the Oreo selections and find that there are 20 different Oreo flavors.  And every time I buy the new flavor, she tries it and never finishes the bag. She always goes back to the original cookie.

The new TSP website needed an overhaul, a fresh look.  Now the categories jump out at you. The website has now presented those main categories in a distinct way so as you age you can find what you are looking for. As you drill down into the sub-menus it still takes some effort to find a particular TSP form and some sub-menus such as the beneficiary page do not load with ease. OK, there are some bugs to work out. Don’t worry, the TSP board will correct all these issues.

So, what about the 5,000 new mutual funds? The TSP fund already offers a Government Fund, a Bond Fund, a Stock Fund, a Small Cap Stock fund and an International Stock fund. And they offer ten targets balance funds. So how much more variety do you need? Well, my friend, if you have your heart set on investing in a fund that specializes in electric vehicles or cannabis. Go for it.  But it will cost you. I wanted to simply view the 5,000 available mutual funds. The agreement for the Mutual Fund Window requires me to pay the annual fee to open the account just to view the list of available funds and possibly pay the maintenance fee up front. To stop those fees, you have to permanently close your Mutual Fund Window account.

Let us compare the C Fund versus Vanguard S&P 500 Index. They are basically the same type of investment. However, if you invest 10,000 dollars in another fund you will be paying the following:

An annual fee – $55

An annual maintenance fee – $95

A transaction fee – $28.75

Other fees – I am interpreting these to be front load and redemption fees.

The C fund will cost you a 40 cents per $10,000 of investment. Yes, the Vanguard fund has low expense but that is only if you buy it directly from Vanguard. In the TSP, you have to go through the TSP third party vendor, Mutual Fund Window, who is assisting you with that investment. And that convenience will cost you and decrease your rate of return.

On a $10,000 investment transaction, you would be incurring approximately 2% in fees. If your C Fund investment is earning 10% per year. Your investment in the Vanguard S&P Fund would have to earn 12% to compete with the C Fund. Let’s look at another hypothetical example. You invest in the JP Morgan Research Market Fund; you have a 3.51% front load fee and a defer 1% load fee. To compete with the C Fund earning 10%, you would need to generate a 16.5% rate of return. That includes the TSP fees and the sales fees for the JP Morgan fund that is mentioned. Many of the other available funds may have a load fee so you have to read the fine print before you invest.

As a financial coach, many federal employees contact me regarding their retirement, their TSP and their assets outside of the TSP. As a TSP investor, if I want to purchase another fund for whatever reason, I can still do that through a brokerage account or an IRA. But if you want to do that through the TSP there is a surcharge.

Financial success can easily be achieved; it only takes a little effort.

Nearly Useless Factoid

By Robert O’Shaughnessy

Source: San Francisco Chronicle

The Senate on Thursday passed the Sergeant First Class Heath Robinson Honoring our Promise to Address Comprehensive Toxics (Honoring Our PACT) Act. The bill now heads back to the House for final approval before heading to President Joe Biden’s desk.

The legislation, at its core, would expand disability compensation and health care benefits for veterans exposed to toxic substances during their military service.

VA Secretary Denis McDonough told the Senate VA Committee on Tuesday that the PACT Act, combined with the agency’s fiscal 2023 budget request, will give the VA the resources it needs to prepare its health care workforce to treat up to 3.5 million additional veterans.

“This is a very important piece of legislation. I think it’d be very difficult to implement, but oftentimes, the most important things are difficult, and I think we’re ready for it,” McDonough said.

The VA said in a statement last month that the PACT Act would be one of the largest substantive health and benefit expansions in VA’s history, comparable in scale and impact to the 1991 Agent Orange Act.

The VA’s budget request for fiscal 2023 includes $42.2 billion for medical service staffing, and provides for 22,789 full-time equivalent hires, an increase of 14,000 FTEs compared to last year.

McDonough said the PACT Act would give the VA much-needed authority to set higher pay caps for certain health care positions, and that the VA’s ability to get veterans into care more quickly is “obviously impacted by the tightness of the labor market.”

“The first thing we need to do is retain the docs that we have, and you’re giving us new authorities to do that. Pay is a big one, and you’re giving us enhanced recruiting authorities as well. We’re thinking very diligently about this and planning very diligently about making sure that we have the people in the spots, and that we have the buildings for the increased demand that we anticipate seeing,” he said.

White House Press Secretary Karine Jean-Pierre said in a statement last week that the PACT Act marks “one of the most significant and substantive expansions of benefits and services in the Department of Veterans Affairs history,” and that the Senate is taking steps to ensure the VA has the support it needs to effectively implement the legislation.

The Congressional Budget Office estimates the bill would increase spending subject to congressional appropriations by $147 billion through 2031. CBO estimates that 5.4 million veterans, nearly a third of the 19 million veterans in the U.S., will receive some disability compensation this fiscal year.

The PACT Act contains a slew of provisions meant to bolster the VA’s workforce, health care facilities and claims processing capabilities, and is the latest in a series of bills meant to recruit and retain in-demand health care workers and address the agency’s record-high rate of turnover.

Committee Chairman Jon Tester (D-Mont.) and Ranking Member Jerry Moran (R-Kan.) introduced the bill.

Congress in March also passed the RAISE Act, which raises the pay caps for certain VA nurses and physician assistants. McDonough said about 10,000 nurses will see their salary increase next month under that legislation — that’s about one out of every nine VA nurses.

McDonough said the Office of Personnel Management recently gave the VA another year to continue with its direct-hire authority for health care workers.

But even with that expedited hiring authority, Veterans Health Administration officials recently told the committee it’s taking 95 days on average to hire new employees.

“The direct-hire authority, of the many variables in the equation of bringing people on, it’s perhaps the most impactful. It accounts for probably a third of the savings we were able to get, in terms of time to hire. But the hiring and onboarding process is still so sclerotic, that we’re finding things that can change,” McDonough said.

Among the changes the VA is looking at, McDonough said nurses have to write an essay as part of their onboarding process.

“I think that’s antiquated, and we should get rid of that,” he said.

The PACT Act outlines many provisions meant to make the VA a more attractive employer for health care workers in a competitive labor market.

The bill would also give the VA up to $40 million a year to buy out the contracts of certain private-sector health care professionals in exchange for employment at rural VA facilities.

The bill also expands recruitment and retention bonuses for VA employees, including merit awards and pay incentives for employees that have a “high-demand skill or skill that is at a shortage.” The critical-skills pay incentive cannot exceed 25% of an employee’s base pay.

The bill also includes expedited hiring authority for college graduates into competitive service jobs.

The PACT Act also gives the VA 180 days to work with OPM to establish qualifications for each human resources position within the VA, and to establish standardized performance metrics for its human resources positions.

The bill gives the VA a year to submit to the House and Senate committees a plan on how it will recruit and retain HR employees.

The agency would also have 90 days to provide enhanced monitoring of the hiring and other human resources that happen at the local regional and national levels of the department. The agency must also provide at least annual training to human resources professionals in VHA.

VHA officials told the committee last month that non-standardized HR processes at the local level have led to hiring and onboarding inefficiencies across the agency. The legislation, if signed, gives the VA 18 months to develop a national rural recruitment and hiring strategy for VHA.

As part of this strategy, the VA must determine which clinics or centers have a staffing shortage of health care professionals, and develop best practices and techniques for recruiting health care professionals for such clinics and centers. The PACT Act requires the VA to provide the House and Senate VA committees with updates on its progress in implementing the rural recruitment and hiring strategy within 18 months of the bill going into effect and then annually.

The bill would waive pay caps for VHA impacted by the closure or realignment of their official duty stations, which may happen if the agency’s recommendations to the Asset and Infrastructure Review (AIR) Commission come into focus.

The PACT Act also waives pay caps for VHA employees providing care to veterans exposed to open burn pits.

While Senate Majority Leader Chuck Schumer and House Oversight and Reform Committee Chairwoman have opposed the planned closure of VA medical centers in New York, Sen. Richard Blumenthal (D-Conn.) said the VA can’t continue to deliver modern health care in outdated facilities.

“This strategy is untenable. In fact, it’s not a strategy,” Blumenthal said. “There is no way that the Veterans Administration can continue quality care with facilities of that age at a time when technology requires that the entire structure of a facility be designed and built to accommodate the most modern means of delivering care, of monitoring patient health.”

McDonough said that if the AIR Commission process doesn’t move forward, the MISSION Act still requires the VA to conduct four-year reviews of its real-estate needs in each of its regional health care markets.

“We’re watching to see what you all choose to do with the nominees for the AIR Commission. In all cases under the MISSION Act. We’re required to go back and look each four years at what the needs are in each of those markets across the country,” he said.

Meanwhile, the PACT Act authorizes 31 leases for new VA health care facilities across the country.

Bill mandates VA updates on claims automation

The PACT Act also gives the VA 180 days to submit a plan to Congress on the state of IT modernization at the Veterans Benefits Administration.

The report should identify any legacy systems the VA plans to retire or modernize, as well as update Congress on the progress the VA is making in automating claims processing decisions.

The bill states that automation “should be conducted in a manner that enhances the productivity of employees,” but keeps VA employees in charge of making the final decision of granting benefits to claimants.

The bill makes clear that the automation should “not be carried out in a manner that reduces or infringes upon the due process rights of applicants.”

McDonough told the committee that the current claims backlog is 188,000, which is down from 265,000 claims only a few months ago.

The VA announced in January that the automation pilot, through its newly created Office of Automated Benefit Delivery, is processing claims within a day or two, while the traditional method of processing these claims currently takes well over 100 days, on average.

The VA began the pilot by automating claims of service-related hypertension, and is adding three new diagnostic codes each quarter.

McDonough said that by the end of the year, the 12 most common claims will be automatable.

While the Biden administration and some lawmakers have pressed for federal employees to return to the office, McDonough said the VBA productivity increased during the pandemic.

“As we think about questions about do people come back in the office, or do they work virtually, we’re taking that into consideration,” he said.

VA is also in the process of hiring 2,000 additional claims personnel.