Sen. Daniel Akaka, D-Hawaii, today introduced a bill that would automatically increase the Thrift Savings Plan contributions of some new federal employees. The Save More Tomorrow Act would only apply to automatically-enrolled feds — that is, new employees who make no choice on TSP and are automatically enrolled in the G Fund at 3 percent — and would boost their contributions by 1 percent each year.
Akaka’s office said this would help push more feds to invest 5 percent of their paychecks in their TSP. That’s the amount federal employees have to contribute to get the maximum matching contribution from their employing agency. The Federal Retirement Thrift Investment Board, which governs TSP, has repeatedly expressed concern that many federal employees are leaving money on the table by not contributing 5 percent.
The Save More Tomorrow Act will make it easier for new TSP participants to save for retirement. Pairing automatic enrollment with automatic escalation in 401(k) plans has proven effective in increasing private sector savings rates. Congress should incorporate this best practice into the TSP.