A little less than a year after the Thrift Savings Plan instituted automatic enrollment for new federal employees, the Federal Retirement Thrift Investment Board said most new hires are opting for the automatic plan or even choosing higher contributions.
Tom Trabucco, the director of external affairs at the Federal Retirement Thrift Investment Board that oversees your TSP, told Federal News Radio the numbers so far look “pretty good.”
When a new federal employee is hired, they are automatically enrolled in the TSP at a contribution rate of 3 percent, which comes directly from the employee’s paycheck. The employing agency matches that initial 3 percent “dollar for dollar,” Trabucco said, plus an additional 1 percent, all of which is invested in a TSP account.
Since TSP instituted automatic enrollment in August 2010, only 4,321 new employees have opted out, Trabucco said.
Meanwhile, during that same time period, 59,850 new hires stuck with the original 3 percent contribution. In addition, some 103,528 made their own elections instead of automatic enrollment, or, after being automatically enrolled, have since “taken control of their investments,” Trabucco said.
Either way, Trabucco said the TSP Board sees success in the numbers. TSP’s goal was “to make sure that people know what benefits are available to them and exercise their will over those benefits,” he said.
In fact, while he didn’t have specific numbers, Trabucco said he suspected almost all of those making their own elections were opting for a higher contribution because agencies will continue to match at the 4 percent and 5 percent level, although at a reduced rate of $0.50 for every dollar an employee contributes.
The new enrollment numbers were presented at a quarterly TSP board meeting this week, where the board also voted to continue its same investment policies for the G Fund.
Automatic enrollment was first authorized in the summer of 2009 by the Thrift Savings Plan Enhancements Act, which also included a number of other benefits that have since been implemented in a “logical order,” Trabucco said.
Immediate employer contributions were launched first, which brought immediate benefits for new federal employees, he said, because they would no longer have to wait six to 12 months to receive a matching contribution from their agency.
Last summer, TSP implemented automatic enrollment. “It was a big undertaking because it involved the employing agencies of government who, of course, are the ones who – through their payroll structure – take those contributions out of your paycheck and make sure they’re forwarded for investment.”