Warren-Portman "Smart Savings Act" to Strengthen Retirement Savings Passes Senate
Bipartisan, Bicameral Legislation Will Enroll Federal Employees in Retirement Investment Funds with Substantially Higher Returns
WASHINGTON, DC - On Tuesday evening, the Senate unanimously passed bipartisan legislation introduced by Senators Elizabeth Warren (D-Mass.) and Rob Portman (R-Ohio) to help substantially increase financial returns for federal employees' retirement plans without increasing federal spending. The legislation was co-sponsored by Senators Mark Begich (D-Alaska), Mike Enzi (R-Wyo.) and Jon Tester (D-Mont.).
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 will retain their existing discretion to elect for more or less conservative investment options. The House has also approved companion legislation introduced by Congressmen Darrell Issa (R-Calif.) and Elijah Cummings (D-Md.).
"I'm glad the Senate has passed this bipartisan legislation to improve the retirement security of our federal workers," said Senator Warren. "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."
"I applaud the passage of this legislation to help ensure that more 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.
"The Smart Savings Act will help federal workers in Alaska and across the nation have a more stable retirement. I am glad this bipartisan bill has passed the Senate, and I urge the House to pass this as soon as possible so that retirees have more financial security, earn more savings, and have a better quality of life -- keeping Alaska families and our economy strong," said Senator Begich.
"Helping new federal workers be more secure in their retirement without additional costs to taxpayers is a smart, practical move we can make now that pays dividends for the future," said Senator Enzi.
"This bipartisan bill goes a long way in helping federal employees and their families make smart investments that better prepare them for retirement," Senator Tester said. "I'm pleased to have worked with Senators Warren and Portman on this important issue."
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 passage of the Smart Savings Act will ensure that more federal workers are enrolled in a plan that helps them adequately save for retirement.