TSP Proposals Getting an Airing

The House federal workforce subcommittee this week is holding a fairly rare oversight hearing on the TSP, focusing on a legislative proposal the program made last year that would require a default personal contribution of 3 percent of salary for newly hired employees and investment in the lifecycle fund most suited to the person’s age—unless, in each case, the individual makes a different choice. The proposal was made because newly hired employees traditionally have been slow to begin investing their own money in the TSP, losing out on government matching contributions although still receiving the automatic 1 percent contribution; overall, about a sixth of FERS employees make no personal contributions. The current default fund is the TSP’s most conservative, the government securities G fund, and many employees apparently just leave the money there without considering whether that is the proper fund for them. The hearing also could be the vehicle for debate over the changed interfund transfer policy, as well as the issues of creating new investment funds and a "Roth" option.