The increases in both rates reflect the impact of policy changes. Image: pogonici/Shutterstock.com
The percentage of FERS employees who are investing in the TSP and the percentage of those investing enough to capture the maximum government contribution both hit record highs for the program in March, according to a presentation at the TSP’s monthly meeting for April.
What the TSP calls the FERS “participation rate”—those making personal investments—has reached 95.4 percent while 86.5 percent of FERS participants are getting the maximum employer contribution, it said. For comparison, in 2018 the former rate was 90.5 percent and the latter was 79 percent.
The increases in both rates reflect the impact of policy changes designed to achieve that end. Since 2010 newly hired employees have made personal investment by default; under prior policy they had to opt in to making personal investments. In addition, since 2020 the default rate for them has been 5 percent of salary—which captures the maximum government matching contribution of 4 percent of salary in addition to the automatic 1 percent contribution—up from the 3 percent used in the prior 10 years.
Employees who are enrolled by default can choose a different level of investment but as a practical matter many of them stick with the default arrangement—which in addition steers both personal investments and agency contributions into the lifecycle L fund appropriate for the person’s age. Another effect of the default investment policy has been to increase the L funds’ share of total investments, now above 23 percent.
The presentation also showed that as of the end of March, the average FERS account balance was about $163,000 and that of CSRS participants about $181,000, up about $6,000 and $7,000 respectively since year-end 2022. The total on investment was $780 billion, up from $726 billion over the three months.
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