Legislators are considering allowing federal employees to deposit the cash value of their unused sick leave and vacation time into their Thrift Savings Plan accounts.

The Internal Revenue Service allows private sector employees to do the same with their 401(k) plans for unused leave that cannot be rolled over. TSP participants can't do that, however, unless Congress modifies the Federal Employees Retirement System Act, the bill that created the Thrift Savings Plan.

Several TSP improvements, such as automatically enrolling new federal employees in the plan, were included in a tobacco bill Obama signed in June. Chairman Stephen Lynch, D-Mass., said at a Nov. 3 House hearing that it was an oversight to have left out of those legislative improvements a measure that would enable federal employees to deposit their unused leave cash equivalents into their TSP accounts."Credits for unused sick leave is a great idea … shame on us for not anticipating that and putting it in our bill," Lynch said, adding that he wants to move on the idea soon.

Union representatives attending the hearing of the House Oversight and Government Reform subcommittee on the federal workforce, Postal Service and the District of Columbia also applauded the idea. They said it would increase participation in the TSP and contribute more funds to employees' retirement accounts, which have been depleted by the country's recent financial turmoil.

"Many of our members carry over the maximum amount of annual leave on a yearly basis, 240 hours, so this could significantly boost their TSP accounts," said Colleen Kelley, president of the National Treasury Employees Union.

Lawmakers and witnesses also debated whether the TSP board should offer a mutual fund option, which was authorized in the June tobacco legislation. Only a small portion of federal employees would participate in a mutual fund, said Greg Long, executive director of the Federal Retirement Thrift Investment Board, which oversees the TSP.

Mutual funds can be risky endeavors which require substantial knowledge of financial markets and risk, which makes them a dangerous prospect for employees unfamiliar with volatile stock markets, said Rep. Gerald Connolly, D-Va.

"We have to balance the rights of individual members to take risks with their money, but when we're looking at something that is people's retirement funds, we have to balance [that risk] out," he said. "Not so long ago, the previous administration strongly suggested the idea of desegregating part of Social Security and investing it in the market because it was growing so much healthier … and an awful lot of folks would have found their retirement savings in jeopardy."

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