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Sens. Warren & Portman Introduce Bipartisan, Bicameral “Smart Savings Act” to Strengthen Retirement Savings

Mar 12, 2014

Bill Would Enroll Federal Employees in Retirement Investment Funds with Higher Returns

Legislation Introduced in House by Congressmen Issa and Cummings

WASHINGTON, DC - United States Senators Elizabeth Warren (D-Mass.) and Rob Portman (R-Ohio) have introduced bipartisan legislation that would help increase financial returns for federal employees' retirement plans without increasing federal spending. The Smart Savings Act would change the automatic enrollment for federal employees enrolling in the Thrift Savings Plan (TSP) from the overly conservative "G Fund" to an age-appropriate, lifecycle "L Fund" with higher returns. Employees would retain their existing discretion to elect for more or less conservative investment options. Companion legislation has also been introduced in the House of Representatives by Congressmen Darrell Issa (R-Calif.) and Elijah Cummings (D-Md.).


"This proposal is one way to help people save money for retirement - it's a no-brainer that will make a real difference for many federal employees by helping to increase their retirement savings without any additional cost to the government," said Senator Warren. "I'm very pleased to join Senator Portman, Congressman Issa, and Congressman Cummings to introduce this bipartisan legislation to improve the retirement security of our federal workers."


"This legislation will help ensure that more federal employees will have their retirement funds in an account that provides a larger nest egg and more security as they move towards retirement," said Senator Portman.

"The Smart Savings Act will ensure that workers who are planning ahead for retirement are investing in an account that works for them at every stage of their career," Chairman Issa said. "Currently, the default fund is comprised of government securities, which historically provide very low returns. The mix of offerings in an L Fund is designed to give higher returns, while decreasing risk as individuals near retirement. According to the TSP, making L Funds the default investment can help workers better prepare for retirement than investment in the G Fund over the course of their career."

"By changing the Thrift Savings Plan default investment option for new federal employees to the Lifecycle fund, the Smart Savings Act will enable workers to take full advantage of a diversified fund designed to yield higher returns,"Ranking Member Cummings said. "This commonsense change will help our dedicated federal employees save more effectively for retirement."


Federal workers are given the option to invest in the Thrift Savings Plan (TSP) as part of their retirement planning. Currently, new workers are automatically enrolled in the "G Fund," which is made up entirely of U.S. Treasury Bonds. While the G Fund is very safe, it is widely viewed by investment professionals as an overly conservative investment, particularly for younger workers, and can leave many unprepared for retirement.


TSP administrators support changing the default enrollment to the lifecycle funds, or "L Funds," which adjust automatically for participants as they age. The Federal Retirement Thrift Investment Board approved the plan to seek this legislative change in December 2013, after the Employee Thrift Advisory Council endorsement in November 2013.


From the beginning of auto-enrollment in August 2010 until September 2013, the "G Fund's" returns totaled 6.33 percent, compared to a 47.4 percent return for the "L 2040" fund, which is geared toward younger federal employees. As of July 2013, 39 percent of all TSP funds were invested in the G fund, with 29 percent of recently hired Federal employees auto-enrolled. The Smart Savings Act would help ensure that more federal workers are enrolled in a plan that helps them adequately save for retirement.

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