TSP urges Congress to back two legislative proposals

The board that oversees the federal employee Thrift Savings Plan has sent two new proposals to Congress, urging lawmakers to adopt legislation that would allow automatic employee enrollment and change the default fund for indecisive investors.

At a monthly meeting Monday, TSP Legislative Director Tom Trabucco said that while the proposals have been sent to Congress, no action is expected before lawmakers adjourn for the August recess.

"We're off and running," Trabucco said. "But I don't really expect much attention during this three-week period."

The automatic enrollment proposal builds off the 2006 Pension Protection Act, which gave organizations the ability to offer an "opt-out" approach to 401(k) plans. The law allows organizations to automatically enroll employees into such plans unless they indicate otherwise.

Under the proposal, new employees would contribute 3 percent of their paycheck to the TSP by default if they did not designate otherwise, but would have 90 days to withdraw their money. After that, withdrawals would be restricted but employees would be able to halt contributions.

The second proposal would switch the default fund for investors who do not express a preference from the less-risky government securities (G) fund to the TSP's life cycle options, which invest in a more conservative mix of funds as employees near retirement.

At the biannual meeting of the Employee Thrift Advisory Council last month, union and employee representatives agreed that the default proposal would be beneficial, especially to younger participants.

Trabucco said Monday that it is too early to tell whether Congress will take up the proposed changes before the end of the year. "While the issues are not new to the Congress, their schedule appears to be quite full and the calendar is really quite short," he said.

Trabucco added, however, that the House Oversight and Government Reform Subcommittee on the Federal Workforce has alerted TSP officials of an Aug. 2 hearing to discuss federal employee benefits. Trabucco said Gregory Long, executive director of the TSP, has been invited to testify.