According to a recent article in the Federal Times, Sen. Daniel Akaka (D-HI) plans to introduce a bill increasing the Thrift Savings Plan’s (TSP) automatic employee enrollment contribution rate from 3% to 5% for new hires. The increased contribution would automatically be invested into the G Fund upon hiring.
Phased in over three years, the draft proposal is directed toward the scores of federal workers who deposit too little into their TSP’s to receive the government’s full matching contribution. Today, federal workers receive 1-to-1 matching payments for contributions up to 3% of pay. After that point they receive a 0.5% matching payment for every 1% increase in their personal contribution, with a maximum matching payment of 4%.
This bill will ensure that new workers enrolled into the TSP will automatically contribute 5% of their salary to get the full 4% matching payment. Employees who are not willing or able to pay the full 5% personal contribution will have the opportunity to opt out should they choose to do so.
“This is a sound idea that could benefit the long term financial health of the hundreds of thousands of new federal workers that will need to be hired in the coming years,” said NFFE National President William R. Dougan. “With so many employees essentially leaving money on the table today, it only stands to reason that we position them for the best retirement outcome possible, and then let them decide what route to travel.”