Portman "Smart Savings Act" to Strengthen Retirement Headed to the President for

Press Release

Today, U.S. Senator Rob Portman (R-Ohio) announced that his legislation to help substantially increase financial returns for federal employees' retirement plans without increasing federal spending has passed both chambers of Congress and is now headed to the President for signature. Portman authored this legislation with Senator Elizabeth Warren (D-Mass.).

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.

"I'm pleased this commonsense bill will now become law because it will help ensure that the default TSP enrollment option for federal employees provides a larger nest egg and more security as they move towards retirement," said Portman.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.

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