A recent survey of companies sponsoring 401(k)-type programs similar to the federal TSP program found that in many ways the TSP compares well to them and is superior in certain ways.
The findings by the Aon Hewitt consulting firm in a survey of some 400 companies with about 10 million employees are all the more telling because many of them do not sponsor defined benefit-type retirement programs similar to CSRS or FERS and their employees must rely primarily on their defined contribution programs for retirement security. More than three-fourths of the companies said that such programs will be the primary source of retirement income for their workers, compared with the federal employment arrangement in which the TSP is an add-on to the defined contribution program, especially so for CSRS employees.
Because of that shift, the report said, many employers are taking steps to help their employees use those programs to their best advantage, such as increasing the amount of guidance they provide to workers about the importance of saving.
One key element of such programs is the employer matching contribution. In the TSP, the government pays no match for CSRS employees, who now make up less than a tenth of the federal workforce and who have a much more generous defined benefit than do FERS employees. For FERS, there is an automatic 1 percent contribution regardless of whether the employee invests, a $1 for $1 match on the first 3 percentage points of salary the employee invests, and a $.50 for $1 match on the next 2 percentage points–a total maximum employer contribution of 5 percent of salary.
The study found that nearly all of the companies pay at least something toward their employees’ accounts, with the most common match is being $1 for $1 on the first 6 percent of employee savings. A fifth of employers use that formula.
Another common feature among private plans is enrollment on hiring by default, a feature the TSP adopted in 2010. Others are Roth-style investing, which the TSP launched in 2012 but still is available in only half of the surveyed plans, and the growing availability of self-adjusting lifecycle funds, available in the TSP since 2005.
