GovernmentExecutive.com

The board that oversees the federal employee Thrift Savings Plan has sent two new proposals to Congress, urging lawmakers to adopt legislation that would allow automatic employee enrollment and change the default fund for indecisive investors.

At a monthly meeting Monday, TSP Legislative Director Tom Trabucco said that while the proposals have been sent to Congress, no action is expected before lawmakers adjourn for the August recess.

"We're off and running," Trabucco said. "But I don't really expect much attention during this three-week period."

The automatic enrollment proposal builds off the 2006 Pension Protection Act, which gave organizations the ability to offer an "opt-out" approach to 401(k) plans. The law allows organizations to automatically enroll employees into such plans unless they indicate otherwise.

Under the proposal, new employees would contribute 3 percent of their paycheck to the TSP by default if they did not designate otherwise, but would have 90 days to withdraw their money. After that, withdrawals would be restricted but employees would be able to halt contributions.

The second proposal would switch the default fund for investors who do not express a preference from the less-risky government securities (G) fund to the TSP's life cycle options, which invest in a more conservative mix of funds as employees near retirement.

At the biannual meeting of the Employee Thrift Advisory Council last month, union and employee representatives agreed that the default proposal would be beneficial, especially to younger participants.

Trabucco said Monday that it is too early to tell whether Congress will take up the proposed changes before the end of the year. "While the issues are not new to the Congress, their schedule appears to be quite full and the calendar is really quite short," he said.

Trabucco added, however, that the House Oversight and Government Reform Subcommittee on the Federal Workforce has alerted TSP officials of an Aug. 2 hearing to discuss federal employee benefits. Trabucco said Gregory Long, executive director of the TSP, has been invited to testify.

COMMENTS

• Are all of you completely nuts? Nobody should be forced into giving money to private enterprise. Taking funds from an employee without their expressed consent is nothing more than organized crime, except now the organizations getting the money are corporations not the mob! Bring back CSRS and let people invest (loan money to coporate America) only when/if they want to. Don Eiermann, President, AFGE Local 1858 Posted July 31, 2007 3:46 PM
• In re post from "ORA": The newly hired workforce constitutes a trivial percentage of those in the TSP? Like other TSP members, the newly hired work force will also want to retain their original basis if ever they would like to rebalance their portfolios. Clearly, in an uptrending market, original basis (i.e., acquired in the past at low NAV) has greater sensitivity to change of NAV as compared to a new basis (i.e., higher than the original basis) got under current TSP rules as a result of rebalancing one's portfolio in the least. ORA, please be advised that the TSP changed its charter to permit plan participants to day trade. There are stories on this website. Further, there is no credibility to the claim that TSP rebalancing in its current form serves to 'protect' TSP members, when in fact, it is causing harm. If the Government is required to protect us from our retirment assets, then why did we obtain day trade and other self-directed investment rights? Surely ORA, you don't intend that the Govt believes we all need Guardian Ad Litems to protect us from managing our retirment assets?! The Thrift Investment Board and the TSP trust pool are 'profiting' by not doing as corporate 401k's typically do (i.e., rebalance only the desired $ amt/% of a fund family). Further, rebalancing is not day-trading. Rather, it is portfolio management. What's more, readily available personal financial software enables individuals to manage investment portfolios. G.Grindle Posted July 20, 2007 7:50 PM
• In re post from "Numbers Man": ‘Cut & paste' of TSP data is arduous, especially when TSP member account data is available. Why not provide TSP members the benefit others get through their corporate 401k’s/404C’s? Surely, TSP members deserve the ability to rebalance in part and retain the FIFO basis of parts not essential to a rebalancing. Surely, TSP members deserve the means to automatically download member account data. Yet, the TSP, along with ORA and Numbers Man, obfuscate the argument with disingenuous positions. Some might come to view the unnecessary 'whole portfolio' rebalancing as an inappropriate transfer from plan participants to the TIB/TSP. Perhaps a competitive bid should be put out for an administrator able to provide TSP members the services they should receive. TSP members want to rebalance in part, not on the whole and at new cost bases. TSP members want to retain their original cost basis so as to retain the greater sensitivity to market increases. TSP members don't want to be deprived of that sensitivity and have it replaced by lower sensitivity got from a new and higher cost basis. And yes, TSP members want to track their retirement accounts in THEIR personal finance and asset management software applications. Clearly, the TSP should be doing for its members what corporate plans do for their plan participants. G.Grindle Posted July 20, 2007 8:20 PM