According to the Federal Times, the 15-member council will ask Congress next week to make two changes:
- New hires would be automatically enrolled in the retirement savings program instead of having to elect to make contributions to the TSP.
- The default setting – the fund in which participants are enrolled if they don’t select an option – would switch from the G Fund to the L Fund, or lifecycle fund.
The Federal Times said the push to change the default option is an attempt to get better returns by putting participants in a better performing fund. The G Fund, tied to government securities, is less volatile than TSP’s other stock and bond funds, but typically yields lower returns than those funds. The Lifecycle funds, or L Funds, invest in all five underlying funds at different percentages based on when a participant expects to begin making withdrawals.
In May, Gregory Long, the executive director of the TSP said he was giving consideration to adopting auto enrollment and adding the Roth IRA (See TSP’s Long Considers Auto Enrollment, Roth IRA ), but feared it would create more work for the administrative offices. Long also indicated a possible change in the default fund for participants who make no investment choice from government securities to lifecycle funds, which have already proven to be popular among federal employees (See TSP Lifecycle Funds a Big Hit ).
The TSP announced in October 2006 that it would consider adopting automatic enrollment (See TSP Considers Switch to Auto Enrollment ).
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