Warren-Portman Smart Savings Act to Strengthen Retirement Savings Passes Homeland Security & Government Affairs Committee
Bipartisan, Bicameral Legislation Would Enroll Federal Employees in Retirement Investment Funds with Higher Returns
WASHINGTON, DC - Today, the United States Senate Homeland Security & Government Affairs Committee passed by voice vote the "Smart Savings Act," originally introduced by Senators Elizabeth Warren (D-Mass.) and Rob Portman (R-Ohio) and cosponsored by Senators Mark Begich (D-Alaska), Mike Enzi (R-Wyo.) and Jon Tester (D-Mont.) to 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.).
"I'm pleased the Smart Savings Act was voted out of committee today, moving us one step closer to improving the retirement security of federal workers without any additional cost to taxpayers," said Senator Warren. "This is a no-brainer that will help people save money for retirement and make a real difference for many federal employees and their families."
"Today's vote is an important step forward for legislation that will help ensure that more federal employees have their retirement funds in an account that provides a larger nest egg and more security as they move towards retirement," said Senator Portman.
"I am glad the committee took action on the Smart Savings Act, which will help federal workers in Alaska and across the nation earn a greater return on their investments while helping retirees earn more savings and have a better quality of life," said Senator Begich. "Providing this financial security will not only help keep Alaska families strong, but also will help keep our economy strong and allow Alaska's federal workers to have a more stable retirement."
"Most experts agree that the difference between what Americans are saving for retirement and what they will need to retire comfortably is between six and eight trillion dollars," Senator Tester said. "This bipartisan bill goes a long way in helping federal employees and their families make smart investments that better prepare them 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 endorsed the idea 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.