Smart Savings Act

Thank you, Chairman.

Again, thank you, Ranking Member Cummings.

Mr. Speaker, we are the board of directors for the Government of the United States. Our committee oversees the equivalent of an IRA or a 401(k) in the private sector, known as the TSP. It sounds like a lot of initials, perhaps, to people who are hearing this, or it is even, in some cases, confusing to the Federal workforce, but it is really quite simple.

We have through oversight discovered with the Thrift Investment Board that, in fact, we have done a disservice to the Federal workers by putting them into an absolutely, positively safe investment that does not keep up with inflation. Effectively, the dollars they contribute, and matching dollars from the government as an employer, are shrinking every year in constant dollars. Their investments are, in fact, smaller if they stay in that fund.

Now, near the end of people's careers--in those last couple of years--they may want to lock in with absolute certainty the size of their retirement funds to use in some way after they leave government, but in the first days, it is clear that, in the long run, the only way for an investment to grow greater than inflation is to make the kinds of investments that are possible in the other offerings under TSP, which, again, is the equivalent of a 401(k) in the private sector.

This recognition was well thought out by the Board, was well researched, and brought to our committee. It is one of those simple things that should have been done sooner, so I appreciate that the committee marked it up quickly and that we are bringing it to the floor only a short time later. I hope the Senate will hold it at the desk and will quickly allow the President to make it law because, once it is law, Federal workers will, for the first time, have a default that keeps up with or exceeds inflation.

The decision to make it quick is not because we are in a hurry. It is because, every day, Federal workers, by default and through no fault of their own, unwittingly, are finding themselves in inappropriate savings plans in their 401(k)s, known in government as the TSP. I know it is always one of those things where people say: Why are you in a hurry? In this case, we are in a hurry because we realize we should have gotten it right sooner, and we certainly are glad that we got it done now. On behalf of the committee that oversees the Federal workforce, we hope that they will appreciate that they have, if you will, a bit of an apology that we didn't act on this even quicker.

It is important to make sure that the Federal workforce has a good pay and benefits package, and in this case, they have a good retirement package through TSP that was underperforming for many of our Federal workforce. I believe, today, the default will make it perform better while taking away none of their inherent choices, including if they want to remain in the G Fund.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, as an original cosponsor of this bill, I want to thank Chairman Issa and Congressmen Farenthold and Lynch for working with me on this bipartisan legislation.

The Smart Savings Act would amend current law to change the Thrift Savings Plan default investment option from the Government Securities Investment Fund, or the G Fund, to the Lifecycle Fund, or L Fund. This is a commonsense change that would help our Federal civilian employees save more effectively for their retirement.

The Federal Retirement Thrift Investment Board, which manages the TSP, has indicated that many TSP participants are not actively managing their accounts and therefore not taking full advantage of their investment options.

Thrift Board data shows that 33 percent of participants who were automatically enrolled in TSP accounts when they were hired have not changed their investment allocations and remain totally invested in the G Fund. Many of these participants are young employees who would benefit most from long-term investments in a diversified portfolio such as the L Fund.

Although there is little to no risk in investing in the G Fund, over the long term, the return on investment is only about half of the L Fund. It does not make sense to have our Federal employees miss out on the potentially higher returns that the L Fund may provide over the long term.

There is precedent for this in the private sector. Surveys show that nearly 80 percent of private employers use lifecycle funds as the default investment option for the 401(k) plans offered to their employees.

In implementing this legislation, it would be important for the Thrift Board to thoroughly explain to TSP participants that the L Fund is subject to market fluctuations. I understand that there may be some workers who may be concerned about the market risks of the L Fund. This bill would preserve the ability of all employees to change their allocations and transfer their contributions to the G Fund if they so desired.

I urge my colleagues on both sides of the aisle to join me in supporting this bipartisan legislation.

I want to again thank Chairman Issa and all the members of our committee for making this happen, and I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from Massachusetts (Mr. Lynch), a distinguished member of our committee who has worked very hard on these issues and who has been a strong advocate for our Federal employees.

Mr. Speaker, with that, I urge all of our Members to vote in favor of this very important legislation, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4193) to amend title 5, United States Code, to change the default investment fund under the Thrift Savings Plan, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on the bill under consideration.

Mr. Speaker, I yield myself such time as I may consume.

The Smart Savings Act, H.R. 4193, would change the default investment fund for Thrift Savings Plan, or TSP, participants from the G Fund to an age-appropriate asset allocation fund consistent with a recommendation from the TSP governing board. The change would help ensure TSP participants are better prepared for retirement by investing their contributions in a fund designed to yield higher returns over the course of their career.

Currently, new TSP participants are defaulted into the Government Securities Investment Fund, or the G Fund, and remain invested there until they can make an election reallocating their account balance into one or more of the other funding options.

The G Fund comes with some risk. The TSP warns G Fund investors that their account may not grow enough to offset the reduction in purchasing power that results from inflation.

The TSP's asset allocation funds are a mix of the TSP's offerings designed to help yield higher returns while decreasing risk as individual participants near retirement. While the funds expose participants to market risk, they address such risk in their design.

In making its legislative recommendation to Congress, the TSP found that, had the asset allocation funds been the default investment option since the beginning of the automatic enrollment in 2010, participants would have achieved greater returns.

Participants who do not want to assume the market risk associated with the L Fund will, of course, maintain their ability to determine their own allocation. That can include, for instance, transferring their entire balance to the G Fund if that is their desire.

I appreciate the bipartisan support of Representatives Cummings, Woodall, Lynch, Farenthold, Connolly, and Delegate Norton, and urge support for this bill.

I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from California, Chairman Issa, my distinguished colleague and the chairman of the full Committee of Oversight and Government Reform.

Mr. Speaker, I urge all Members to join me in support of this bill, and I yield back the balance of my time.

I thank the gentleman from Maryland for yielding and for his kind words.

Mr. Speaker, as ranking member of the Federal Workforce Subcommittee, I rise in strong support of H.R. 4193, the Smart Savings Act.

This legislation, as has been previously described, would change the default investment option for the Thrift Savings Plan participants from the G Fund to the Lifecycle Fund, or L Fund. The L Fund uses age- appropriate investment allocations, which result in

the higher returns that have been discussed here earlier.

First, I would like to thank my fellow cosponsors--the gentleman from California (Mr. Issa), Ranking Member Cummings from Maryland, Congressman Farenthold from Texas, Congressman Connolly from Virginia, and Congressman Woodall from Georgia--for working together on this bipartisan bill.

The Thrift Savings Plan is an important component of Federal workers' retirement assets. Given the negative impact of pay freezes, furloughs, and other challenges to the pay and benefits of our Federal workforce over the last few years, I feel it is appropriate for Congress to provide investment options that will help Federal employees maximize their retirement contributions and savings. Changing the default investment option to the L Fund makes a lot of sense because the L Funds have substantially outperformed the G Fund over the last several years. However, the bill would also allow employees who are risk averse the ability to opt out and change their investment options.

The House passed a substantially similar bill in the 110th Congress, but it was never enacted. This time around, I am hoping that this commonsense proposal will become law as a substantially similar bill in the Senate was recently approved in committee. H.R. 4193 is supported by many stakeholders, including the Federal Retirement Thrift Investment Board, the Employees Thrift Advisory Council, and various employee organizations.

This legislation provides the dedicated men and women of our Federal workforce a reasonable option that, I believe, would help them more effectively provide for their own retirements. I urge my colleagues to join all of the cosponsors in supporting H.R. 4193.

Mr. President, I ask unanimous consent that the Senate proceed to the consideration of H.R. 4193, which was received from the House and is at the desk.

Mr. President, I ask unanimous consent that the bill be read three times and passed and the motion to reconsider be considered made and laid upon the table with no intervening action or debate.