House Panel Approves TSP Bill

Ismagilov/Shutterstock.com

A House committee on Wednesday approved a bill that would automatically enroll new federal employees in a more diverse, age-appropriate retirement fund rather than the safer government securities offering.

The Smart Savings Act, sponsored by House Oversight and Government Reform Chairman Darrell Issa, R-Calif., would change the default enrollment fund in the Thrift Savings Plan for new hires from the G Fund to the lifecycle (L) funds designed to move investors to less risky portfolios as they near retirement.

The full committee adopted the legislation on voice vote during a morning markup. 

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 are composed of the L Income, L 2020, L 2030, L 2040 and L 2050.

Issa’s bill would only apply to new federal employees hired who are auto-enrolled in the TSP. It will not affect TSP participants who are currently auto enrolled. 

The Federal Retirement Thrift Investment Board, which administers the TSP, last year requested the legislation to switch the default fund from the G Fund to the lifecycle funds. The Employee Thrift Advisory Council, which advises the TSP board on investment policies and the plan’s administration and is made up of representatives from employee organizations, unions and the uniformed services, endorsed the legislative proposal in November after initially opposing it.

FRTIB has found that while automatic enrollment has increased TSP participation, new government hires under the age of 29 have too much money invested in the G Fund – likely a result of auto-enrollment’s G Fund default option. The government securities offering, while traditionally very stable, also does not yield very high returns. InFebruary, the G Fund continued its steady growth, increasing 0.18 percent and as of the end of that month was up 2.03 percent in the last 12 months. Meanwhile, in February, the L Income Fund – for those who already have started withdrawing money – gained 1.15 percent; L 2020 increased 2.73; L 2030 gained 3.44 percent; L 2040 was up 3.94 percent; and L 2050 saw a 4.44 percent boost.

In a move that could perhaps put some detractors of the switch at ease, FRTIB announced last year the lifecycle funds would allocate a larger proportion of their total configuration to the G Fund. The board contracted a consulting firm to review its L Funds allocations and opted to make the change in light of the findings.  

(Image via Ismagilov/Shutterstock.com)

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download
  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care

    Download

When you download a report, your information may be shared with the underwriters of that document.