Senate Passes New Retirement Savings Fund Bill

Categories: Pay

The Senate this week voted to adopt a House-passed bill that will automatically enroll new hires in the Lifecycle Fund, a federal employees’ retirement savings fund that’s geared toward younger employees and yields higher returns but also higher risk. The bill is expected to take effect October 2015.

AFGE is urging the Thrift Savings Plan’s governing board to do extensive educational outreach so federal employees understand the level of risk to which they will be exposed under the L Fund option. L Funds are made up of TSP’s funds that are adjusted over time to balance risk as employees age. The funds have a larger share of higher-risk stock funds early in an employee’s career, but shift toward safer G Fund when he/she nears retirement. From August 2010 until September 2013, the G Fund's returns totaled 6.33%, compared to a 47.4% for the L 2040 fund.

Currently new hires are automatically enrolled in G fund, the most stable investment of the TSP’s options as it’s made up entirely of U.S. Treasury Bonds. New hires are defaulted to allocate 3% of their pay to the fund unless they opt out or change the amount. They also receive a 3% match from their employer unless they opt out. Employees who are currently enrolled in the G fund will not be affected by new legislation.

The bill is supported by the Federal Retirement Thrift Investment Board, which oversees federal employees’ TSP accounts.

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