Congress has passed a bill that will automatically enroll new federal employees in the Thrift Savings Plan's Lifecycle Funds (L Funds), rather than the Government...
By Ginger Whitaker
Federal News Radio
Congress has passed a bill that will automatically enroll new federal employees in the Thrift Savings Plan’s Lifecycle Funds (L Funds), rather than the Government Securities Investment Fund (G Fund).
The Smart Savings Act, introduced by House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.), was passed by the Senate Wednesday. The bill was initially introduced in the House in March of this year, and passed there in July. It now heads to President Barack Obama for his approval.
Since 2010, new federal employees have been automatically enrolled in the TSP’s G Fund at a contribution rate of 3 percent of their salaries. That helped boost new hires’ participation in the TSP, according to Federal Retirement Thrift Investment Board officials. However, the board said it was concerned that too many younger federal employees were not maximizing their returns in the G Fund.
With the passage of the Smart Savings Act, new hires will now be enrolled in the appropriate L Fund, an age-dependent investment and stock portfolio.
L Funds, also known as target-date funds, are made up of a mix of the TSP’s five regular funds, which fluctuate automatically over time to balance risk. Early in an employee’s career, for example, L Funds contain a larger share of higher-risk stock funds. As employees near retirement, the allocation shifts more toward the super-safe securities G Fund.
When the bill is signed into law, it will only apply to new federal employees. The legislation will not affect TSP participants who are already enrolled.
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