The House Oversight and Government Reform Committee approved legislation on Wednesday that would allow agencies to automatically enroll new employees in the Thrift Savings Plan and set their contributions at 3 percent of basic pay.
The legislation (H.R. 6500) would require agencies to invest the automatic contributions in the plan's stable government securities fund. The bill originally called for default investment in the life-cycle funds, which initially focus on riskier but higher yielding investments and then switch to a more conservative mix of investments as an employee nears retirement.
The life-cycle fund default had met with criticism from employee groups.
"Our executive council weighed in pretty strongly against the idea of life-cycle funds as the default option," Jacqueline Simon, public policy director for the American Federation of Government Employees, said at a joint meeting of the Employee Thrift Advisory Council and the Federal Retirement Thrift Investment Board in late June. "They thought it was an important step to authorize the government to lower an employee's salary by deducting contributions and to go further and expose them to the stock market."
Employee groups said they supported automatic enrollment in general, but some agencies, like the Defense Department, said they preferred that the program remain optional. Senators have called on the board that runs the TSP to increase outreach to boost enrollment in the 401(k)-style plan, especially among members of the military.
House Oversight and Government Reform Federal Workforce Subcommittee Chairman Danny K. Davis, D-Ill., attached an amendment to the legislation that would require the board to collect demographic information on asset managers who work on TSP funds. Davis wants more women and minorities to be involved in managing funds, and said the TSP's passive investment approach precluded many minority-owned firms, most of which focus on active investments, from bidding on opportunities to manage funds.
But another provision of the legislation, which would give the board the authority to add self-directed investment funds to the TSP without congressional approval, is likely to spur opposition.
"Contrary to what you might think -- let's grab some power here -- we think it's a big mistake," Andrew Saul, chairman of the TSP board, said in June. "I think the way it was set up was to make this thing apolitical."
James Sauber, chairman of the Employee Thrift Advisory Council and chief of staff for the National Association of Letter Carriers, echoed Saul's opposition at the meeting.
"All due respect to the board members, we're dead-set against this," Sauber said. "We think this could create a situation where this plan could spin off in a direction that no one intended. There's a theory to this plan that it's broad-based, low-cost index funds. It does open up the idea that every single industry in the country that has an index fund could add it to the TSP."
Employee groups and the TSP board have not yet reached an opinion on a third provision of the legislation, which would require the addition of a Roth Individual Retirement Account option to the plan. TSP Executive Director Gregory Long said the board was studying whether plan participants would actually enroll in a Roth IRA. AFGE's Simon said the union would not lobby against a Roth provision.