By Mike Causey

Washington Post - Wednesday, February 10, 1999; Page B08

Federal and postal workers with money invested in the stock-index option of their 401(k) plan continue to enjoy many happy returns.

For the 12 months that ended in January, the C-fund (stock index) returned 32.35 percent. The F-fund (bond index) returned 8.09 percent, and the super-safe G-fund (Treasury securities) returned 5.65 percent.

Most of the money that civil servants have socked away toward retirement -- their contributions to the thrift savings plan -- is in the C-fund. There are two reasons for that:

Many employees have shifted money from the G-fund and F-fund to the C-fund. Many also have allocated a larger share of their regular biweekly payroll deductions to the C-fund because of its performance in recent years.

Years of C-fund returns ranging from 20 percent to more than 30 percent have caused many accounts to double. Some higher-income workers who have invested the maximum amount in the C-fund since the option became available now have accounts worth more than $400,000. Among investors under the Federal Employees Retirement System, the average account balance is nearly $40,000. The average account balance for investors under the older Civil Service Retirement System is nearly $25,000.

Because of the big gains in the C-fund, many workers should consider rebalancing their portfolios. If, for example, an employee started out with the intention of having a portfolio that was 50 percent C-fund and 50 percent G-fund, odds are the C-fund account now represents a much larger percentage of the employee's total investment.

As with any 401(k) plan, savings plan contributions and earnings are tax-deferred until withdrawn. Workers can borrow from their accounts to buy homes or finance a college education or for virtually any other reason. Many younger workers are using the savings plan as the college account fund for their children. The current interest rate for loans is 5 percent.

Most financial planners recommend that employees invest for the long haul and put as much money in the C-fund as they are comfortable with. When the C-fund took a brief nose dive last summer, some employees pulled money out and put it in the safer G-fund. But the C-fund rebounded quickly, and many put money back into the stock fund, which tracks the Standard & Poor's 500.

Depending on when their "trades" were executed, many C-to-G-to-C-fund switchers managed to sell low (when the C-fund was down) and buy high, by jumping back in after the market started to rebound.

That is because it can take two to six weeks to move money between savings plan funds. For instance, fund transfers received by the Federal Retirement Thrift Investment Board -- by way of the ThriftLine (504-255-8777) or the savings plan Web site (www.tsp.gov) or at the board's New Orleans office -- by Feb. 15 will be effective the last day of the month, Feb. 28. Transfer requests made or received after the 15th will be effective as of March 31.

Next year, workers will be able to do daily trading. But financial experts doubt that the faster action will be much help in beating the odds against successful market timing.

Poor Performers

A report that "only" 3.7 percent of federal employees are "poor performers" is good news. How many people in your office -- federal, union or corporate -- are duds?

The Office of Personnel Management arrived at the 3.7 percent figure by taking a "cluster sample" of 3,114 employees out of about 2 million feds. That's a bigger sample than the 1,000 (out of more than 260 million) Americans who are polled to determine such things as the approval rating of Congress or the president.

The accuracy of any poll -- based on a small sampling of a large group -- is debatable. But the numbers become official, and politicians work from them.

The Clinton administration plans a new push to make "performance" a bigger factor in employee pay raises. As a result, Rep. Elijah E. Cummings (D-Md.) says he will ask the House civil service subcommittee to hold hearings on pay-for-performance proposals to make sure they aren't used to discriminate against women or minorities.

Life Insurance Open Season

Federal and postal workers will have an open season, beginning in April, when they can make changes in their coverage under changing federal life insurance programs. Most workers are in the dark -- and with reason. So are most experts. For a little light on the subject, check the Federal Diary tomorrow.

Wednesday, Feb. 10, 1999