GovernmentExecutive.com

The House passed legislation on Wednesday that would automatically enroll new federal employees in the Thrift Savings Plan and set their contributions at 3 percent of basic pay.

The funds from automatic enrollments would be invested in the stable government securities fund to insulate new participants from any potential large losses. The original version of the legislation would have invested those funds in the TSP's life-cycle funds, which begin with a more aggressive mix of investments and switch to a more conservative portfolio as an employee approaches retirement. Employee advocates had expressed concern that investing automatic enrollment funds in the lifecycle funds would expose employees to more risk than they might be comfortable with.

The bill was rolled into a larger piece of legislation, the Family Smoking Prevention and Tobacco Control Act (H.R. 1108), which also advances a measure that grants federal employees who were hired after 1984 credit for unused sick time in their pension calculations.

The measure makes two other significant changes to the TSP. First, it would require the Federal Retirement Thrift Investment Board to include a Roth Individual Retirement Account option in the plan. TSP Executive Director Gregory Long has said the board is studying whether or not plan participants would select a Roth IRA. Roth contributions are taken out of income that already has been subject to income taxes, while TSP contributions come from pre-tax income.

The measure rolled into the larger legislation also contained a new provision relieving the TSP's fiduciaries of legal liability for allowing plan participants to invest in self-directed investment funds or restricting them from making such investments. The stand-alone bill contained two other liability provisions that were included in the measure passed by the House, one of which blocked federal employees from suing the fiduciaries over automatic enrollment or investing automatic enrollment funds in the government securities fund.

Tom Trabucco, the TSP's director of external affairs, said the board supported the new liability language, which grew out of discussions with Congress.

COMMENTS

• I've heard some things about the TSP, found this website. Not sure what to think about it now though. If anyone smarter than me wants to check it out, but it seems legit. Whoever made it has links which seem to back up what they say. I mean, the TSP investing in terrorism? As a military service member I don't want my money going there. Stewart Posted September 21, 2008 12:39 AM
• I am totally in agreement that TSP should be mandatory to protect employees who are not very well informed on retirement accounts. My problem are the choices we are allowed to make. Most of the TSP funds are to conservative and the rate of return is too low, especially for someone like me who entered Federal Service at the age of 48. We need flexibility in our investment accounts and the ability to invest in the standard mutual funds that are available within the US (i.e. T Rowe Price, Fidelity,etc.). I came from a local government (Fulton County, Atlanta, GA) and they allowed us to pick from a host of funds available to most US citizens, not the funds created by the government with limitations on the annual rate of return. I also have a problem with the fact that we allow a company outside of this country to manage our mutual fund accounts. What is wrong with US management companies? Earline Shaw Posted August 1, 2008 3:44 PM
• Why was this not the case at the get go when FERS was enacted? Why all of a sudden does the Guvmint care that we have enough in retirement? Keep in mind that the contributions and or matching is money the Guvmint does not have to "payout to you". That saves them guvmint $$$$$, and currently they are desperatly trying to find enough $$$$ to fund Shrubs 100 year war! Think about it! rooster Posted August 1, 2008 2:16 PM