Federal employees will get four new features in their Thrift Savings Plan, including a Roth 401(k) option that allows them to contribute after-tax dollars into their savings plan and then withdraw them at retirement tax-free.

The TSP upgrades were approved today as part of the tobacco bill. The bill — HR 1256, the Family Smoking Prevention and Tobacco Control Act — puts the Food and Drug Administration in charge of regulating tobacco and imposes restrictions on the marketing and production of tobacco products.

The TSP upgrades are likely to be popular additions to the federal retirement investment program.

But many federal unions and employee groups were disappointed the final tobacco bill did not include another highly coveted benefit that would have meant bigger retirement checks for hundreds of thousands of federal employees. The House-passed version of the bill would have allowed unused sick leave accumulated by employees covered by the Federal Employees Retirement System (FERS) to be counted toward their retirement payments. But the Senate version of the bill, passed Thursday, did not include the sick leave measure.

The House voted 307-97 today to approve the Senate version of the bill.

Federal unions and employee groups had seen the sick leave measure, introduced in the Senate by Joseph Lieberman, I-Conn., as a way to boost morale and cut the number of accumulated sick days employees take just before they retire.

Civil Service Retirement System employees already get credit for unused sick leave in the calculation of their annuities.

Congress' passage of the bill will bring numerous changes to the Thrift Savings Plan, namely:

• A Roth 401(k) option, which would let participants put some or all of their after-tax salary into an account that will grow without tax liability on future earnings.

The Federal Retirement Thrift Investment Board governing TSP said it could have a Roth option ready in one or two years.

A Roth option would benefit those whose income tax bracket would be in higher during retirement than during their federal or military careers.

Uniformed service members and select groups of federal civilian employees, such as judges, are among those likely to benefit from a Roth option. About 634,000 service members now participate in TSP. Most federal civilian employees, however, would not benefit from a Roth investment option.

• Automatic enrollment of new federal civilian employees.

The Federal Retirement Thrift Investment Board said this will encourage more young employees to start saving for their retirement as soon as they begin working for the government and take advantage of matching funds offered by their agencies. Employees would have 90 days to opt out of the program and receive a full refund.

The bill leaves to the Defense Department the decision of whether to automatically enroll military service members into TSP. The Defense Department has already told the Federal Retirement Thrift Investment Board it intends to automatically enroll military service members after a Roth option is established. Unlike federal civilian employees, military members receive no matching funds.

• A survivor benefit that would allow spouses of deceased TSP participants to maintain TSP accounts.

• A mutual fund option that would allow participants to direct their TSP funds to private-sector mutual funds. The board would be authorized to select the mutual funds that would be available to plan participants.

It's far from certain that a mutual fund option will become reality. The Federal Retirement Thrift Investment Board could choose not to offer a mutual fund, and the board's executive director, Gregory Long, has described the board's attitude toward mutual funds as "agnostic." Long said the mutual funds could be a "proving ground" for different investment options, and could dissuade lawmakers or third-party groups from trying to add new funds to TSP.

Daniel Adcock, legislative director for the National Active and Retired Federal Employees Association, described the Congress' failure to approve the FERS sick leave measure as a "setback."

"But those who've been at this a while know that these things happen. It's just a matter of putting all the pieces together. … We have a lot of things going for this legislation," Adcock added.

A stand-alone sick leave bill, HR 958, was introduced by Rep. James Moran, D-Va., in February.

Under the bill, retiring FERS employees would be compensated for their unused sick leave.

Currently, the more than 1.4 million employees covered by FERS receive no compensation for sick leave they accumulate over their careers, and many begin to suffer from the so-called "FERS flu" in the last few years before retirement. The Office of Personnel Management has estimated this costs the government $68 million a year in lost productivity.

The bill would compensate FERS-covered employees for all of the unused sick leave they have accumulated when they retire.

Unused sick leave would be added to the employee's time in service when calculating his FERS annuity.

Jessica Klement, government affairs director for the Federal Managers Association, said passing the sick leave bill will be the group's No. 1 priority this year.

The group also supports passage of another measure that failed to be included in either the House or Senate versions of the tobacco bill: a bill to allow agencies to rehire retired federal employees at no financial penalty to those retirees. Currently, retirees who take jobs with the federal government have their paychecks reduced by the amount of their retirement annuities, unless they get waivers from the Office of Personnel Management.

Management groups support this provision on grounds it would help agencies rehire retirees who possess experience and skills. Unions oppose the measure, arguing that agencies will rely too heavily on rehiring retirees to fill talent shortfalls and not enough on hiring new employees.

The Senate declined to vote on this measure — and on the FERS sick leave measure — on grounds they were not germane to the tobacco bill.

"We will continue to work to move these bills through Congress. It would be nice to see that this year, when we had a lot of momentum. We don't want to lose that momentum," Klement said.

Staff writer STEPHEN LOSEY contributed to this story.