Letters

Touting the Thrift Plan

Susan Holliday should be commended for recognizing that politically charged issues have distracted many journalists from key Thrift Savings Plan statistics regarding voluntary contribution rates (Sept. 1, "No Fed Left Behind"). I can assure your readers that the Federal Retirement Thrift Investment Board has not been distracted. Board members have made abundantly clear that we should leave no stone unturned in preaching the gospel of TSP participation in the farthest corners of the federal employee world. In pursuing this mandate, we have joined hands with the Office of Personnel Management, the employee unions and associations, Congress and agencies.

The vastly underreported yet highly effective collective efforts of these entities have produced significant increases in participation. Here are some key growth statistics from the past five years alone:

• Total participation has grown by nearly 1 million.
• More than 800,000 individuals maintain their accounts after leaving service, assuring the availability of additional resources to help with an ever lengthening period of retirement.
• Half a million service members now have funds in their new TSP accounts.
• More than 50,000 new Federal Employees Retirement System employees contribute even before they become eligible for employer contributions.
• After just five years, the Navy's efforts to encourage participation has generated a participation rate of 50 percent, even though service members receive no match.
• Eighty-four agencies have achieved FERS participation rates that exceed 90 percent.
• U.S. Postal Service letter carriers contribute at a rate of 95 percent.

Although TSP participation rates are very high, the overall FERS participation rate has not increased in recent years. Holliday concedes that the government has taken seriously its mandate to educate employees. So what else should be done?

In a survey we conducted, 68.5 percent of respondents said immediate employer contributions would be the best way to increase the contribution rate. The estimated $1 billion price tag, however, has rendered this unachievable for the time being.

Holliday suggests even more education and training. This approach has yielded an 86 percent FERS participation rate, which far exceeds the private sector 401(k) average. But doing more might never succeed with the remaining 14 percent to 15 percent.

The board has urged a different approach-automatic enrollment. Survey respondents told us this would be the second most effective improvement, just behind immediate employer contributions. Automatic enrollment was approved by Congress for private plans just last year, and more are adding it. Agencies are prepared to implement such a program, and it has gained the support of the employee unions and associations. Just before the August recess, I sent to Congress a legislative proposal to authorize a program of automatic enrollment for TSP.

Because TSP participation already substantially exceeds the private sector, our gains might not be quite as large. Even if we obtain just a 1 percent or 2 percent increase in FERS participation, however, that translates into 20,000 to 40,000 more participants who will be better prepared for retirement.

I thank Holliday for focusing on participation, but I must correct her assertion that the Thrift Investment Board could "inadvertently create a retirement system of haves and have-nots." TSP is not a retirement system; rather it is one element of the Federal Employees Retirement System. The other two elements of that system-the FERS-defined benefit component and Social Security-were designed to ensure that lower-paid FERS employees would receive a total preretirement income "replacement ratio" that equals or exceeds that provided under the old Civil Service Retirement System.

Gregory T. Long
Executive Director, Federal Retirement
Thrift Investment Board