Smart Savings Act
Floor Speech
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Mr. CUMMINGS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, as an original cosponsor of this bill, I want to thank Chairman Issa and Congressmen FARENTHOLD and LYNCH for working with me on this bipartisan legislation.
The Smart Savings Act would amend current law to change the Thrift Savings Plan default investment option from the Government Securities Investment Fund, or the G Fund, to the Lifecycle Fund, or L Fund. This is a commonsense change that would help our Federal civilian employees save more effectively for their retirement.
The Federal Retirement Thrift Investment Board, which manages the TSP, has indicated that many TSP participants are not actively managing their accounts and therefore not taking full advantage of their investment options.
Thrift Board data shows that 33 percent of participants who were automatically enrolled in TSP accounts when they were hired have not changed their investment allocations and remain totally invested in the G Fund. Many of these participants are young employees who would benefit most from long-term investments in a diversified portfolio such as the L Fund.
Although there is little to no risk in investing in the G Fund, over the long term, the return on investment is only about half of the L Fund. It does not make sense to have our Federal employees miss out on the potentially higher returns that the L Fund may provide over the long term.
There is precedent for this in the private sector. Surveys show that nearly 80 percent of private employers use lifecycle funds as the default investment option for the 401(k) plans offered to their employees.
In implementing this legislation, it would be important for the Thrift Board to thoroughly explain to TSP participants that the L Fund is subject to market fluctuations. I understand that there may be some workers who may be concerned about the market risks of the L Fund. This bill would preserve the ability of all employees to change their allocations and transfer their contributions to the G Fund if they so desired.
I urge my colleagues on both sides of the aisle to join me in supporting this bipartisan legislation.
I want to again thank Chairman Issa and all the members of our committee for making this happen, and I reserve the balance of my time.
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