TOPICS
TOPICS
Lawmaker introduces automatic TSP enrollment bill
Rep. Stephen Lynch, D-Mass., has introduced legislation (H.R. 1263) that would automatically enroll new federal employees and members of the military in the Thrift Savings Plan and assign their investments to the government securities fund.
"Currently, 14 percent of the eligible federal civilian and 75 percent of uniformed service members are not participating in TSP," Lynch, the new chairman of the House Oversight and Government Reform Federal Workforce Subcommittee, said in a statement. "Therefore they are less likely than participants to be financially self-sufficient."
Automatic enrollment is supported by both the Federal Retirement Thrift Investment Board and a range of federal employee groups, all of which argue the practice makes it easier for workers to save for retirement. The thrift board met with congressional leaders in February to discuss what the automatic enrollment legislation might entail.
The contribution for employees who are enrolled automatically in the TSP would be set at 3 percent of basic pay, although the thrift board would have the authority to reduce it to as low as 2 percent, or to raise it as high as 5 percent.
Putting new enrollees' money in the government securities, or G Fund, is a safe option, proponents say, because the fund is the most conservative offering in the TSP. The G Fund has made small gains even as other funds have been roiled by the financial crisis. If employees who are enrolled automatically in the TSP eventually decide that they do not want to invest in the TSP and choose to withdraw the money that was invested for them, they are least likely to suffer losses if their money is invested in the G Fund.
The legislation also requires the thrift board to design a Roth Individual Retirement Account option and include it in the plan. Similar legislation passed the House last summer, but the Senate did not take it up.
The bill also addresses a number of issues for federal retirees. It would allow Federal Employee Retirement System enrollees to cash out their unused sick days when they retire, and would allow annuitants to buy health insurance through the Federal Employees Health Benefits Program with pre-tax dollars.
"We strongly support Chairman Lynch's legislation because it addresses a number of inequities endured by federal workers and annuitants," said Margaret Baptiste, president of the National Active and Retired Federal Employees Association. "Uppermost in our minds is the premium conversion benefit. All federal and military retirees devoted their working lives to the common good, and as a matter of equity, the health tax relief should be offered to the entire federal family."
COMMENTS
- Suzanne, it’s not just the Army’s military that lacks vital TSP information; but practically every department I’ve seen that has civilians in the program also. While there is a plethora of literature, it seems that only the folks with the interest, inclination, or background figure the process out; many of us becoming ad hoc advisors to our coworkers. I know of several ex-military and long time civilians that do not understand the impact of the TSP on their retirement. Many have never filled out their lifetime SSN earning or brought in their TSP balances into EBIS to get a consolidated estimate of their retirements; let along used the calculators to process various scenarios (with or without insurance, survivor benefits, etc) to estimate their different possible retirements. For many 20 year career civilians, 401(k)s are like platypuses; some strange animal they vaguely remember hearing about. While I understand that it is beholding to each and every civilian and military employee to learn about this system; there really should be an office or person on every installation that gives classes, reaches out to the masses (both military AND civilians) BEFORE the retirement specialist starts their out processing. I am very concerned about that sudden SLAM in the head many will face far too late. I worry about a new class of working poor; our retirees. Tip off Posted April 8, 2009 4:51 PM
- My 2 sons are in the Army and they only know a lot about TSP because I told them. The Army does not do a good job of telling their military personnel about the benefits of TSP. Suzanne Posted March 27, 2009 11:41 AM
- Charlie-if you have yout TSP in G fund, you are not loosing money. At minimum you are keeping your investment without loosing the principal. If you have invested in the others, you have taken calculated risk to play stock market. Many others - It is your choice to decide how much you will contribute. If you will not even bother to educate your self on TSP, don't make your own deduction selection perhaps only 1%, then the mandatory 3% will be taken. Don't complain, if you do not get in on your own. Even the $666.00 @ every two weeks can choose to have deducted only 1% and survive. That is $6.66 every two weeks. You can do it, I did, and you will be glad later. Walk sometime to the store, do away with your extra cell phone minutes, stop paying for cable,eat out less, at least once a week and that does count McDonalds. Beside that you will be paying less taxes on your earnings, granted not to much less since you are only contributing 1%. But believe me it does adds up. Read up you all before you jump to conclusion. fedworker Posted March 9, 2009 2:33 PM
