TSP Considers Switch to Auto Enrollment

October 17, 2006 (PLANSPONSOR.com) - The board of the federal Thrift Savings Plan (TSP) is considering requests of plan changes for the next Congress to approve that mimic provisions of the recently passed Pension Protection Act (PPA), including automatic enrollment.

Govexec.com reports that, while the PPA clarified how private 401(k) plans should utilize auto enrollment (See Pension Reform Influences Automatic Enrollment Designs ), separate legislation would be necessary for the TSP to adopt such a program. The TSP board hopes to bring more military members into the plan. Currently, only 23.6% of members of the uniformed services participate in the TSP, Govexec.com said.

In addition, the board is considering a request for approval from Congress to change the default investment election for those participants who do not make an election from the G Fund, made up of short-term Treasury securities, to the L Funds, or lifecycle funds. In response to the PPA, the Department of Labor (DoL) issued new guidelines for qualified default investment alternatives for private defined contribution plans last month (See DoL Releases Default Investment Option Safe Harbor ). The DoL approved lifecycle or targeted retirement date funds as one of three potential default options.

TSP Executive Director Gary Amelio told Govexec.com that the board is also considering requests to add a Roth 401(k) option to the TSP, allowing participants to make after-tax deferrals, as well as additional loan restrictions and investment options. Consultants from Ennis Knupp & Associates are currently conducting a review of all possible investment additions to the plan.

The TSP board plans to randomly select about 20,000 participants to complete a mail-in survey of opinions on its legislative ideas by the end of the year.

TSP Assets to Reach Milestone

Separately, the Washington Post reports that Andrew Saul, head of the Federal Retirement Thrift Investment Board, said balances in the TSP could reach $200 billion by year end. Saul said that would make the plan twice as large as four years ago.

According to the Post, the TSP is benefiting from the market upswing. Since the start of the year, the TSP’s international stock index fund has gained 14.55%, and the large, common stock index fund has returned 8.49%, according to data presented to the TSP board at its monthly meeting on Monday. Meanwhile, investment expenses also increased this year, totaling $9.85 million, which TSP officials attribute to increased activity in the international index fund.