Some federal employees could see their Thrift Savings Plan contribution levels increase automatically under draft legislation circulating on Capitol Hill.
Sen. Daniel Akaka, D-Hawaii, has sought input on a bill tying automatic enrollment in the government’s 401(k) style retirement plan to annual increases in the amount of money employees contribute to those retirement accounts.
Currently civilian employees who choose to enroll automatically into the TSP contribute a rate of 3 percent of basic pay to the G Fund, unless they choose to terminate their contributions or change the amount. According to Akaka’s draft bill the individual’s contribution rate would increase by 1 percent annually at least until the full match takes effect (typically two years under the current formula). The agency’s full TSP matching rate is 5 percent.
A source familiar with the draft legislation said Akaka could introduce the bill as early as next week.
Similar to auto-enrollment, Akaka’s so-called auto-escalation bill also would allow employees to opt out of the benefit. As of March, 82,632 feds were automatically enrolled in the TSP, according to the the Federal Retirement Thrift Investment Board, which also reported that 2.8 percent of the workforce either declined TSP participation immediately upon hiring or opted out of automatic enrollment.
The board discussed the draft legislation during its monthly meeting on Tuesday. A forthcoming analysis on the impact of auto-enrollment on TSP contribution rates isn’t ready yet, so the board isn’t weighing in at the moment on Akaka’s draft bill.
The legislation builds on the 2009 TSP Enhancement Act which created automatic enrollment, and aims to entice the relatively small group of employees who do not take full advantage of the TSP match to save more. According to the 2011 TSP satisfaction survey, which included more than 8,000 respondents, feds on average reported saving 11.5 percent of their pay to retirement, compared to the 7.3 percent of pay private-sector employees save. Eighty-six percent of those surveyed said they were satisfied with the TSP’s competitiveness with other private sector plans, its accessibility, safety and security -- a 5 percent increase from the previous survey in 2008.