Members of Congress Really Seem to Like the TSP
Lawmakers put forward yet another proposal to create a retirement account for American workers modeled after feds' Thrift Savings Plan.
House lawmakers have introduced a bill that would create a new retirement program for American workers modeled on the Thrift Savings Plan.
The bill would automatically enroll private-sector workers without access to a retirement savings plan through their employer into an American Savings Account to help them build nest eggs. Workers could choose to opt out of the plan.
The American Savings Account would be fashioned after the TSP, which is available to federal employees and members of Congress, rather than typical private-sector 401(k) options. Employers would be able to provide matching or non-matching contributions to employees ASA accounts under the legislation, introduced by Democratic Reps. Suzanne Bonamici of Oregon and Jared Huffman of California.
Sen. Jeff Merkley, D-Ore., introduced the same bill back in January, at the time the Center for American Progress Action Fund, a sister group to the Center for American Progress, outlined its idea for creating a National Savings Plan that workers without access to a retirement account would be automatically enrolled in, and which would adjust investment levels based on the person’s proximity to retirement, similar to how the TSP works.
Merkley’s bill still is pending in the Senate Finance Committee.
“The Thrift Savings Plan is a high-quality retirement plan because it offers simple, easy-to-understand, and sensible investment options that have very low fees,” said David Madland, senior fellow at CAP Action and senior adviser to CAP Action’s American Worker Project, in a statement released by Huffman’s office. “It is used by millions of federal employees, including members of Congress, and has a proven track record of helping people achieve a secure retirement.”
But the board that oversees the TSP has some concerns with the legislation. A provision in both bills requires the executive director as well as three members of the Federal Retirement Thrift Investment Board to sit on the board that would oversee the American Savings Account. Kim Weaver, FRTIB director of external affairs, has said the provision makes them nervous because “obviously we take our fiduciary status and responsibilities quite seriously, and to have our executive director have a split duty to both the TSP participants and these other people is concerning.”
Weaver earlier this year said she wasn’t sure if there would be a conflict of interest, but “I think it’s impossible to say that there wouldn’t be.” For instance, BlackRock, the company that manages several of the TSP’s funds, could potentially bid to manage new funds in a national American Savings Account. “Would that create a conflict of interest? I don’t know,” said Weaver. “It’s way too early to say, but that’s the kind of stuff that we wouldn’t even want to have to worry about.”
At the time Weaver made her remarks in February, Merkley spokeswoman Martina McLennan said the “TSP’s independence and fiduciary responsibilities to federal employees are precisely the qualities that make TSP’s board members a natural fit to serve under the ASA,” adding that the board members would “be a voice at the table able to bring their expertise” in setting up a similar retirement system.
The TSP board discussed the legislation during its monthly board meeting on Monday. Weaver said she doesn’t think the bills will come up this year for significant action. “Not much is moving on either side at all.”
The TSP has approximately 4.9 million participants, including federal employees, lawmakers and military service members, with assets totaling about $470 billion as of May 2016.
This isn’t the first time leaders have looked to the TSP for ideas on how to provide retirement security to more Americans. Former GOP presidential hopeful Sen. Marco Rubio of Florida proposed allowing all Americans access to the TSP in 2014, but the bill didn’t gain traction. The plan was similar to one proposed by President Obama in his 2014 State of the Union address, which suggested giving all Americans access to the TSP’s government securities (G) fund. In late 2015, the Obama administration rolled out the MyRA (Retirement Account) program with the aim of helping more workers save for retirement.