TSP to Increase Auto Enrollment to 5% Later This Year
Proposed regulations would increase the rate at which federal employees automatically contribute to their Thrift Savings Plan accounts from 3% to 5% beginning in October.
The Thrift Savings Plan will increase the default amount that new federal employees contribute to the federal government’s 401(k)-style retirement savings program from 3% to 5% beginning later this year.
According to a proposed rule posted Friday to the Federal Register, beginning October 1, all new federal employees and military service members automatically will contribute 5% of their salary to their TSP accounts.
The measure marks the latest effort by TSP officials to encourage feds to save adequately for retirement. Contributing 5% to one’s TSP account also means securing the largest government contribution to the program.
“The TSP’s goal is to help federal employees and members of the uniformed services retire with dignity,” the proposal stated. “As of December 31, 2018, 26% of TSP participants were contributing less than 5% to their accounts, which means they were not receiving the full amount of agency/service matching contributions they are entitled to.”
Although the automatic contribution amount when employees are first hired will be 5%, they still can increase or decrease it if they wish.
Although most participants who were enrolled in the TSP before September 30 will not be affected by the change, service members enrolled in the TSP as part of the Blended Retirement System who have subsequently terminated their contributions will be re-enrolled at the higher rate.
“[Blended retirement] participants who are automatically enrolled in the TSP as of September 30, 2020, and subsequently terminate their TSP contributions will be affected by the automatic reenrollment rate increase unless they elect to resume TSP contributions by the last full pay period of the year,” the TSP wrote. “All participants may elect to change their contribution rates at any time by contacting their respective agencies.”
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