Compliance March 13, 2009

Legislation Would Add Auto Enrollment Feature to TSP

March 13, 2009 (PLANSPONSOR.com) - Tacked onto a U.S. House bill aimed at regulating tobacco products is legislation to make changes to the Federal Thrift Savings Plan (TSP).
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A news report on FedSmith.com says the Family Smoking Prevention and Tobacco Control Act (HR 1256) would provide for automatic enrollment in the TSP, with employees able to opt out of participating. The bill also directs the TSP to provide for qualified Roth 401(k) contributions.

According to the news report, the bill would give the TSP the option of setting up a “self-directed investment window,” with restrictions limiting these investment options to:

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  • low-cost, passively-managed index funds that offer diversification benefits; and
  • other investment options, if the Board determines the options to be appropriate retirement investment vehicles for participants.

The changes were first recommended in the House in May 2008 (see Lawmakers Propose Sweeping TSP Changes ). The House Oversight and Government Reform Committee previously approved the addition of the automatic enrollment feature (see House Panel Passes TSP Auto Features Bill ).

FedSmith.com also reported that other legislation tacked on to the tobacco measure would provide for unused sick leave to be counted toward the computation of the retirement benefits for federal employees under the Federal Employees’ Retirement System (FERS) as it is for employees under the Civil Service Retirement System (CSRS).

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