Beginning next fall, new federal employees will have 3 percent of their paychecks automatically go into “lifecycle” retirement accounts determined by their age, thanks to a bill that Congress passed last week.

As the employees grow older, their investments will automatically downshift to less-risky options.

The Federal Retirement Thrift Investment Board, which runs the Thrift Savings Plan, considers the Smart Savings Act a major victory.

“It’s one down,” Kim Weaver, the board’s director of external affairs, told members at a meeting held Monday.

While President Barack Obama has not signed the bill into law yet, if all goes as planned, the board is shooting for an October launch, she said. The legislation gives the board nine months from enactment to implement the language.

New federal employees have been automatically enrolled in the G Fund, invested in low-risk Treasury securities, since 2010. But that’s usually the smartest option only for people nearing retirement.

“There is a cohort of people who are auto-enrolled in the G Fund and they’re sitting there,” said Weaver. It “may be appropriate for some people to be 100-percent in the G Fund, but it’s probably not appropriate for everybody.”

The legislation will not strip new employees of their abilities to choose investments, Weaver said. Nor does it apply to current federal employees, including those who are auto-enrolled in the G Fund now.

Between now and October, the board must make programming changes to comply with the law and test the technology, Weaver said.

This bill was the only piece of legislation that the board was fighting for in this Congress, but there could be more items next year. The board is reviewing its customer services in efforts to satisfy more participants, particularly those nearing or in retirement who are tempted to withdraw all their savings after they stop working.

“We’re doing big thinking now and out of that, we’ll possibly have some legislative initiatives,” said Weaver. Changing withdrawal options would require a new law.

It’s the little things that add up in happiness and cents

Speaking of customer service, the board last month enabled its customer service representatives to reset participants’ passwords on the phone. No longer do participants have to wait nine or ten days for their new password to come in the mail. That adds up to about 1,500 happier federal employees a day, according to the board’s director of participant services, Thomas Emswiler.

“The reason we did that was to reduce the pain for our participants,” said Weaver.

But the agency estimates it saves 53 cents every time it doesn’t have to put a password in the mail. It expects to save about $191,000 per year.

TSP Roth Funds hit $2 billion for the first time

It took just 2 1/2 years for federal employees to invest a total of $2 billion in “after tax” Roth retirement accounts.

The Federal Retirement Thrift Investment Board launched the Roth option in May 2012.

“It’s been even more popular than we thought it would be,” said Weaver.

With Roth accounts, participants invest after-tax dollars, so when they withdraw their savings many years later, they do not owe any taxes.

Nearly half of the 460,000 Roth account holders in the federal system are members of the military. That’s as expected, said Weaver. Service members tend to be paid less, so they stand to gain less in tax savings from the regular TSP retirement options.

On average, those service members have invested $3,100 in Roth accounts, or about a sixth of their total TSP savings. That statistic alone is worth mulling over. Civilians under the Federal Employees Retirement System have saved an average of $115,336 in TSP accounts, according to the board’s November statistics.

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