The proyect should be ammended to the fact that some states limit how much one may put into the Thrift Savings Plan to an amount much less than permitted by the IRS. For example the IRS allows $16,500 plus $5,500 in catch-up for those over 50 for a total of $22000 in income deferred for taxation. Well in Puerto Rico the Commonwealth limits this amount to $9,000, a difference of 12,000 whic becomes taxable for the tax year. This is a desincentive for Federal Employees in Puerto Rico to put the maximum allowed by the IRS because not only will be paying tax for the difference they also risk double taxation when they decide to receive their annuities when they retire (you pay the current year for the difference and 10-15 yeasrs down the road who will know that you paid taxes on that $12,000 diferences)…taxes are higher in Puerto Rico and the brackets are lower…it’s not nice getting hit with a 33% tax payment but in addition to that with paying it twice. Bottom line is that PR Federal Employees are going to pay higher taxes and receive lower pensions than their mainland counterparts. We introduce a Bill in the PR Legislature to change this but it was tabled…Now with the current fiscal crisis, who dares suggest allowing a greater percentage of tax deferred money? On the contrary they may want to reduce the amount allowed. There are two other states that have these restrictions besides Puerto Rico and the Thrift Savings Board can speak to Congress about that.
Reccomendation: Add a brief ammendament that states be obligated to respect Federal Employees retirement system. It should be uniform regarding IRS permissible contributions.
Jaime Alvelo
Jaime.Alvelo@va.gov