Bill Would Change TSP Default Settings to More Lucrative Funds

Senate Banking Committee member Sen. Elizabeth Warren, D- Mass. Senate Banking Committee member Sen. Elizabeth Warren, D- Mass. Jacquelyn Martin/AP

A Senate committee will consider a bill on Wednesday 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 Sen. Elizabeth Warren, D-Mass., 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 Senate Homeland Security and Governmental Affairs Committee plans to mark up the legislation during a business meeting on Wednesday. The House Oversight and Government Reform Committee reported out that chamber’s companion bill in March.

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 legislation 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.

“This proposal is one way to help people save money for retirement -- it's a no-brainer that will make a real difference for many federal employees by helping to increase their retirement savings without any additional cost to the government,” said Warren, when she introduced the bill in March.

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. 

For instance, last month the G Fund inched up 0.20 percent, increasing 2.26 percent since May 2013. The L Income Fund for TSP participants who already have started withdrawing money gained 0.64 percent last month. L 2020 increased 1.20 percent in May; L 2030 gained 1.46 percent; L 2040 was up 1.63 percent; and L 2050 saw a 1.78 percent boost.

Overall, participation in the TSP is growing; it climbed to 87.4 percent in May, according to the latest data from the board released on Monday during its monthly meeting. The total plan balance increased by 1.51 percent, and now exceeds $412 billion. The average account balance for TSP participants enrolled in the Federal Employees Retirement System increased to slightly more than $111,000 in May. The average 401(k) account balance for private-sector workers was $89,300 in 2013, according to a February CNN report.

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

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

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


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