TSP Reconsiders Automatic Enrollment

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The board that administers the Thrift Savings Plan is contemplating changes to the automatic enrollment program.

Some officials have expressed interest in having new hires contribute a percentage of their basic pay to one of the TSP’s five lifecycle funds instead of the government securities fund. The TSP launched a program in August 2010 that automatically signs up all new civilian hires to allocate 3 percent of their basic pay to the G fund, unless they choose to end their contributions or change the amount. Participants also receive a 3 percent match and a 1 percent contribution from their agencies, unless they opt out of automatic enrollment.

The G fund is the most stable investment of the TSP’s options, while the L funds are a mix of the TSP’s G, F, C, S and I offerings, and are crafted to help yield higher returns through diversity. The L funds, composed of the L Income, L2020, L2030, L2040 and L2050, are designed to move investors to less risky portfolios as they near retirement.

Automatic enrollment has increased TSP participation, but new government hires under the age of 29 have too much money invested in the G fund -- likely a result of automatic enrollment’s default option, said Renee Wilder, director of Office of Enterprise Planning at the Federal Retirement Thrift Investment Board during the group’s monthly meeting in Washington. The board just completed an analysis of TSP participant behavior and demographics. Gregory Long, the TSP’s executive director, said the agency wants to look at whether 3 percent is the right amount for automatic enrollment.

Long said the idea of switching the default fund in automatic enrollment from government securities to one of the lifecycle funds has come up before, but has met some resistance from the Employee Thrift Advisory Council. ETAC, which advises the TSP board on investment policies and the plan’s administration, is made up of representatives from employee organizations, unions and the uniformed services. Long, who in the past has proposed the change, said he’s “not sure that view is shared by the members of the thrift advisory group.”

The TSP board has a meeting in April with ETAC at which they will discuss the idea, among other TSP policy and management matters.

TSP participation rates overall are high, according to the board’s analysis. The participation rate among Federal Employees Retirement System enrollees in February was 86.9 percent and 40.2 percent among service members. Wilder said younger TSP enrollees are less engaged than older participants, and the board plans to work on ramping up its outreach to the under-30 crowd.

By the end of 2012, the TSP had about 4.6 million enrollees with $330 billion invested among its 10 fund options.

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