[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
               MANAGING THE THRIFT SAVINGS PLAN TO THRIVE 

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                    POSTAL SERVICE, AND THE DISTRICT
                              OF COLUMBIA

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 3, 2009

                               __________

                           Serial No. 111-36

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

Subcommittee on Federal Workforce, Postal Service, and the District of 
                                Columbia

               STEPHEN F. LYNCH, Massachusetts, Chairman
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             BRIAN P. BILBRAY, California
ELIJAH E. CUMMINGS, Maryland         ANH ``JOSEPH'' CAO, Louisiana
DENNIS J. KUCINICH, Ohio
WM. LACY CLAY, Missouri
GERALD E. CONNOLLY, Virginia
                     William Miles, Staff Director















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 3, 2009.................................     1
Statement of:
    Long, Greg, Executive Director, Federal Retirement Thrift 
      Investment Board; James Sauber, Chair, Employee Thrift 
      Advisory Council; J. David Cox, national secretary-
      treasurer, American Federation of Government Employees 
      [AFL-CIO]; Colleen Kelley, president, National Treasury 
      Employees Union; Margaret Baptiste, president, National 
      Active and Retired Federal Employees Association; Richard 
      Strombotne, ETAC representative, Senior Executives 
      Association; and Colonel Michael Hayden, USAF, retired, 
      deputy director, Government Relations, Military Officers 
      Association of America.....................................     8
        Baptiste, Margaret.......................................    54
        Cox, J. David............................................    34
        Hayden, Colonel Michael..................................    75
        Kelley, Colleen..........................................    47
        Long, Greg...............................................     8
        Sauber, James............................................    27
        Strombotne, Richard......................................    68
Letters, statements, etc., submitted for the record by:
    Baptiste, Margaret, president, National Active and Retired 
      Federal Employees Association, prepared statement of.......    56
    Chaffetz, Hon. Jason, a Representative in Congress from the 
      State of Utah, prepared statement of.......................    91
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............    96
    Cox, J. David, national secretary-treasurer, American 
      Federation of Government Employees [AFL-CIO], prepared 
      statement of...............................................    36
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    92
    Hayden, Colonel Michael, USAF, retired, deputy director, 
      Government Relations, Military Officers Association of 
      America, prepared statement of.............................    77
    Kelley, Colleen, president, National Treasury Employees 
      Union, prepared statement of...............................    49
    Long, Greg, Executive Director, Federal Retirement Thrift 
      Investment Board, prepared statement of....................    11
    Lynch, Hon. Stephen F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............     3
    Sauber, James, Chair, Employee Thrift Advisory Council, 
      prepared statement of......................................    29
    Strombotne, Richard, ETAC representative, Senior Executives 
      Association, prepared statement of.........................    70


               MANAGING THE THRIFT SAVINGS PLAN TO THRIVE

                              ----------                              


                       TUESDAY, NOVEMBER 3, 2009

                  House of Representatives,
Subcommittee on Federal Workforce, Postal Service, 
                      and the District of Columbia,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:06 p.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen F. Lynch 
(chairman of the subcommittee) presiding.
    Present: Representatives Lynch, Cummings, Connolly, 
Chaffetz, Bilbray, and Cao.
    Staff present: William Miles, staff director; Aisha 
Elkheshin, clerk/legislative assistant; Jill Crissman, 
professional staff; Dan Zeidman, deputy clerk/legislative 
assistant; Adam Fromm, minority chief clerk and Member liaison; 
Howard Denis, minority senior counsel; and Alex Cooper, 
minority professional staff member.
    Mr. Lynch. The subcommittee on the Federal Workforce, 
Postal Service, and the District of Columbia hearing will now 
come to order. I understand we have many things going on on the 
floor today, and I think the ranking member, Mr. Chaffetz, is 
there now, and we are also expecting some Members to come over, 
so we will have to do the best we can. And in the event that 
Members are not present, we will allow them in the record to 
submit testimony at a later time.
    I do want to welcome the Members who are here in the 
hearing, witnesses, all those in attendance. The purpose of 
this hearing is to examine a host of issues confronting the 
Federal Retirement Thrift Investment Board as it upgrades the 
TSP, the Thrift Savings Plan, infrastructure and security 
capabilities in response to multiple legislative initiatives, 
regulatory proposals and a changed financial landscape.
    The Chair, ranking member and subcommittee members will 
each have 5 minutes to make opening statements, and all Members 
will have 3 days within which to add statements to the record 
and any other incidental documents.
    Ladies and gentlemen, despite recent signs of economic 
recovery, the past year has been a fairly tumultuous year in 
the financial world, which is why I have called today's hearing 
to discuss and assess the status of the Thrift Savings Plan. 
Millions of Americans have lost a significant portion of their 
401(k) retirement savings during the latest market downturn, 
and the TSP, which is basically our 401(k) of the Federal 
community has not been immune, as many Federal employee TSP 
accounts demonstrate. They have also been significantly 
diminished in size. Given the absolutely integral role the TSP 
plays in determining the future retirement income of FERS 
employees, I feel it is critically important that the 
subcommittee conduct routine oversight of this aspect of the 
Federal Employees Retirement System.
    Therefore, today's hearing is intended to compare the TSP's 
performance against private sector plans, as well as to discuss 
whether Federal employees, annuitants and survivors have been 
given the right plan and the proper tools to build an adequate 
retirement. Additionally, the recent enactment of the tobacco 
bill, H.R. 1256, included several major TSP-related provisions, 
which I am proud to highlight were also included in a bill I 
introduced, H.R. 1263, such as instituting both auto-enrollment 
and immediate agency contributions as well as creating a Roth 
401(k) option and authorizing a mutual fund window. These 
recent changes deserve our close attention, especially during 
the critical developmental and implementation stages, which 
again point to the relevance of today's hearing.
    I would also like to note the need for further debate over 
the addition of a mutual fund window feature for the TSP. As 
this option is being pondered, I believe it is important that 
we all have some level of understanding about the potential 
impact such changes could have on raising costs and 
administrative fees while at the same time giving fair 
consideration to the need to provide TSP participants with 
adequate investment options.
    Today's hearing will also provide us a chance to hear from 
the board about the upcoming roll out of the new TSP Web site 
and its recent $18 million capital investment. Further, today's 
hearing will provide employees' representative groups 
opportunities to share suggested regulatory and or legislative 
proposals. It is my hope that the testimony feedback we receive 
today will provide the committee with precise guidance and 
direction. Again, I thank each of you for being with us this 
afternoon, and I look forward to your participation. This 
concludes my opening statement.
    And I will now yield to my friend and colleague, Mr. 
Chaffetz, for his opening statement.
    [The prepared statement of Hon. Stephen F. Lynch follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Chaffetz. Thank you, Mr. Chairman.
    As a fan of ``just in time,'' I have to tell you, I 
appreciate your patience and indulgence. I know I am a few 
minutes late, having been detained there on the floor, but I 
appreciate your participation and everybody here today and the 
expertise that you bring to bear and the important matters that 
we will discuss today. I want to thank the chairman for holding 
this hearing on such an important matter.
    The Thrift Savings Plan is a central component of the 
Federal Employees Retirement System [FERS], and its success is 
critical from a number of different standpoints. Clearly, the 
kind of retirement an employee is offered at a given job has a 
significant impact on the employer's ability to recruit and 
retain people with the best skills and qualifications. 
Therefore, it is important that the TSP is managed carefully 
and properly, which means regular congressional oversight and 
legislation when necessary.
    This has been one of the most challenging economic years 
the country has had in decades, and we are not out of the woods 
yet by no means. The timing of this economic crisis has truly 
been tragic for a number of reasons. The Federal Government is 
disproportionally top heavy with employees who are rapidly 
approaching Federal retirement, and now many of them find that 
while their defined benefits are intact, most FERS employees 
have taken a massive hit to their retirement savings.
    We all know that in the world of investments, there are 
always ups and downs. The way of measured success of long-term 
investment is not in a snapshot of a year but over the life of 
an investment. This hearing will give us a chance to find out 
whether the TSP and others responsible for its management 
believe they have the necessary tools to complete the job or if 
there are things that we in Congress can do to help.
    The Thrift Savings Plan Enhancement Act of 2009 was signed 
into law in June and made several improvements to the function 
of the TSP. Perhaps most significantly, the Roth type 
investment options was offered, allowing participants to pay 
taxes on retirement savings now rather than upon withdrawal. 
This is a great tool, especially for younger employees at the 
lower end of their earning spectrum.
    However, this tool has been available in the rest of the 
investment world for decades. We also know that the TSP 
continues to have far fewer investment options than most 
private retirement programs. With that said, the TSP continues 
to outperform most private 401(k)'s and is unparalleled in its 
low associated administrative costs.
    TSP can be frustrating to navigate. However, I believe that 
how the TSP interfaces with its participants is critical to its 
continued success in participation. Improvements can still be 
made. When we introduced these new investment tools as we did 
in June of this year, we must also see that its participants 
are fully informed of their available options. I look forward 
to working with the chairman and those responsible for managing 
the system to ensure that Federal employees continue to have 
one of the best investment vehicles available anywhere, and 
appreciate the input and suggestions from the participants. 
Again, I thank you for your participation and your being here 
today, and I will yield back the balance of my time, Mr. 
Chairman.
    Mr. Lynch. Thank you. The Chair now recognizes the 
distinguished gentleman from Maryland, Mr. Cummings, for 5 
minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman. I won't 
take that much time.
    And I do appreciate you holding this hearing today. The 
Federal Employees Thrift Savings Plan is one of the best 
retirement plans offered by any employer. Under the plan, the 
government contributes a specific dollar amount or percentage 
of pay into an employee's account which can be invested in 
stocks, bonds or other financial instruments. This is an 
excellent program which many of our Federal employees benefit 
from greatly, and we must do all that we can in our power to 
ensure that it remains vibrant and strong. The enactment of the 
Thrift Savings Plan back in 2009 brought about some welcome 
changes to the program. That act permits new employees to begin 
contributing to the TSP, immediately rather than waiting 6 to 
12 months.
    Early participation in the Federal Employees Retirement 
System, particularly in the Thrift Savings Plan, is critical if 
an employee is going to maximize the amount of savings earned 
for his or her retirement. Not only does the act include 
provisions to eliminate the waiting period requirements, but it 
authorizes automatic enrollment for all new Federal civil 
employees. Currently, the TSP has 4.2 million participants. 
Automatic enrollment will largely increase participation in the 
savings plan.
    The act also authorizes adding a new Roth 401(k) investment 
option, allowing participants to contribute after-tax dollars 
to the TSP, therefore allowing them to withdraw contributions 
and associated earnings tax-free. Last, this act would allow 
spouses of deceased Federal employees to leave funds in the TSP 
and become the managers of those accounts. I am eager to hear 
how some of these provisions will be rolled out, the timeframes 
of these changes, along with the new proposals, such as the 
unused annual leave proposition allowing employees to deposit 
their unused annual leave into their TSP accounts.
    The TSP holds approximately $234 billion in assets, making 
it the world's largest defined-contribution plan. Hearings like 
this are important to ensure that the program continues to 
serve the best interests of Federal employees, uniform 
services, Reserves and their spouses.
    And with that, Mr. Chairman, I yield back.
    Mr. Lynch. Thank you.
    The Chair now recognizes--actually, I know that the 
gentleman from Louisiana, Mr. Cao, has declined the opportunity 
to make a 5-minute statement, but I do want him, since you are 
a new appointee to the committee, I did want to welcome you on 
behalf of the committee and invite you to become, you know, 
deeply involved in the issues that come before the committee. 
But by all means, welcome.
    Mr. Cao. Thank you very much, Mr. Chairman.
    I am very honored to be in this committee and to address 
the many issues that we are facing in this country, and I hope 
that my contributions to this committee can somehow have some 
impact to you from the problems that we are facing.
    Mr. Lynch. Thank you.
    The Chair now recognizes the gentleman from northern 
Virginia, Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    And thank you for holding this important hearing. Since it 
represents a substantial portion of most Federal employees' 
retirement savings, the Thrift Savings Plan is of vital 
importance to the Federal work force. It is the largest defined 
contribution retirement plan arguably on earth, with 4.2 
million participants and $234 billion in assets. In the past, 
some have attempted to use the TSP to promote political 
objectives.
    Fortunately, the Federal Retirement Thrift Investment Board 
and the Employee Thrift Advisory Council have successfully 
fended off those efforts, and as a result, the TSP has more 
value today. Shortly before the real estate bubble burst, for 
example, some suggested that the TSP should have a fund which 
would be invested in real estate investment trusts. Federal 
employees' retirement savings are safe today because we did not 
make that investment at the height of the real estate market. 
The REIT index declined 40 percent just between January and 
April of this year. Others have suggested creating gold, copper 
or other specialized TSP funds.
    Although Congress did give the Thrift Investment Advisory 
Board authority to invest in funds, such as mutual funds, it 
did not force the board to do so. The TSP already has six 
funds. One consists entirely of U.S. Treasury bonds; the others 
are a variety of index funds. All of these funds represent 
fairly secure investments over the long run, unlike more 
specialized investments and assets that could fluctuate more 
than a diversified portfolio. Because the TSP replaced part of 
the Federal employees defined-benefit pensions in 1986, it is 
appropriate that this fund be invested in a conservative manner 
that will maximize Federal employees' retirement security.
    The Thrift Advisory Board is considering creating an option 
for Federal employees to invest their savings in mutual funds 
through the TSP. Given the historically strong performance of 
the TSP, including its superior maintenance of value during the 
recent crisis relative to many other privately managed funds, I 
find it hard to understand why such a change would be 
advantageous for Federal employees. Moreover, as the National 
Active and Retired Federal Employees Association has noted, 
creating additional mutual fund options could drive up TSP's 
administrative costs. Currently just 80 TSP employees manage 
the world's largest 401(k). We should be very cautious about 
proposals that might reduce the efficiency of this agency.
    For these reasons, the Employee Thrift Advisory Council has 
resisted attempts to create mutual funds options within the 
TSP. In the written testimony, the American Federation of 
Government Employees, the National Active and Retired Federal 
Employees Association and the Senior Executives Association all 
have expressed reservations about establishing mutual fund 
windows for TSP.
    During apartheid, some Members of Congress unsuccessfully 
attempted to divest TSP investments from companies that did 
business in South Africa with that government. More recently, 
others have proposed divesting from companies that are 
concerned with the genocide in Sudan. I would be interested, 
Mr. Chairman, in learning more about whether we could establish 
and should establish social responsibility criteria within the 
TSP without reducing the security of Federal employees' 
retirement in the administration of the TSP.
    Again, I want to thank Chairman Lynch for holding this 
hearing. I applaud the TSP Employee Advisory Council and the 
Advisory Board for resisting past attempts to make potentially 
risky investments and look forward to working with these groups 
to protect the security of the TSP as we move forward. And I 
yield back.
    Mr. Lynch. I thank the gentleman. Before we move to witness 
testimony, I would like to offer brief introductions of our 
panelists.
    Greg Long is the Executive Director of the Federal 
Retirement Thrift Investment Board, the agency that administers 
the TSP, and serves as CEO and plan managing fiduciary. Prior 
to his appointment as Executive Director, Mr. Long was the 
TSP's Director of Product Development where he was responsible 
for strategic planning and the development of new services and 
savings products.
    James Sauber is the chief of staff to the president of the 
National Association of Letter Carriers, and in addition to his 
role at the Letter Carriers Association, Mr. Sauber has served 
on a voluntary basis since 2003 as the elected chairman of the 
statutorily created Employee Thrift Advisory Council [ETAC]. I 
will try to keep the acronyms to a minimum today.
    J. David Cox is the national secretary-treasurer of the 
American Federation of Government Employees, the Nation's 
largest union representing Federal and D.C. government 
employees. Previously Mr. Cox served as the co-chair of the 
Veterans Affairs National Partnership Council from 1999 to 
2000, and again from 2002 to 2006.
    President Colleen Kelly is the president of the National 
Treasury Employees Union, the Nation's largest independent 
Federal-sector union, representing employees in 31 different 
government agencies. Ms. Kelley is a former IRS revenue agent 
and was first elected to the union's top post in August 1999.
    Richard Strombotne has represented the senior--wait a 
minute. We are out of order. OK.
    Margaret, I am sorry. I will go with you. They have the 
pages out of order. Margaret L. Baptiste was reelected for a 
second 2-year term as the National Association of Retired 
Federal Employees national president in September 2008. She is 
the first woman to be elected as NARFE president and first 
spouse of a Federal retiree to hold the position.
    Richard Strombotne has represented the Senior Executives 
Association on ETAC for 10 years as a charter member of the 
SEA, the Senior Executives Association. He served on its Board 
of Directors for 8 years. Additionally, Mr. Strombotne has been 
extensively involved with the National Active and Retired 
Federal Employees Association.
    And last but certainly not least, Colonel Michael Hayden, 
U.S. Air Force, retired, joined the MOAA legislative team in 
July 2005 upon completion of a 25-year military career in air 
and space operations, personnel recruiting, training and 
education. At the MOAA, he focused on active duty and 
retirement compensation issues.
    That concludes the introduction of our witnesses. However, 
it is the custom and practice at this committee to swear 
witnesses so that they may offer testimony on the record. May I 
please ask you to rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Lynch. Let the record indicate that each witness 
answered in the affirmative.
    Your entire statement is already included in the record. We 
will now move to the testimony portion. And I would just advise 
you, those small boxes in front of you, one which is working 
and one which is not working, the green light indicates you may 
proceed with your testimony. A yellow light indicates you 
should probably wrap it up. And the red light indicates that 
your time has expired. And since we have a large panel here, I 
will try to hold everybody to the 5-minute limit.
    But Mr. Long, you are welcome and recognized for 5 minutes 
for an opening statement.

STATEMENTS OF GREG LONG, EXECUTIVE DIRECTOR, FEDERAL RETIREMENT 
 THRIFT INVESTMENT BOARD; JAMES SAUBER, CHAIR, EMPLOYEE THRIFT 
 ADVISORY COUNCIL; J. DAVID COX, NATIONAL SECRETARY-TREASURER, 
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES [AFL-CIO]; COLLEEN 
KELLEY, PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION; MARGARET 
   BAPTISTE, PRESIDENT, NATIONAL ACTIVE AND RETIRED FEDERAL 
EMPLOYEES ASSOCIATION; RICHARD STROMBOTNE, ETAC REPRESENTATIVE, 
  SENIOR EXECUTIVES ASSOCIATION; AND COLONEL MICHAEL HAYDEN, 
USAF, RETIRED, DEPUTY DIRECTOR, GOVERNMENT RELATIONS, MILITARY 
                OFFICERS ASSOCIATION OF AMERICA

                     STATEMENT OF GREG LONG

    Mr. Long. Chairman Lynch and members of the subcommittee, 
my name is Greg Long. I'm the Executive Director of the Federal 
Retirement Thrift Investment Board. The five members the board 
and I serve as the fiduciaries of the TSP for Federal employees 
and members of the uniformed services.
    The TSP, as you said, is the largest defined-contribution 
retirement plan in the world. Accounts are maintained for more 
than 4.2 million Federal and Postal employee members of the 
uniformed services and retirees. As of September 30th, the TSP 
had approximately $234 billion in retirement savings. Your 
letter of invitation explained that the purpose of this hearing 
is to examine a host of issues, including upgrades to the TSP's 
information technology, security capabilities, legislative 
initiatives, regulatory proposals and a changed financial 
landscape.
    I am pleased to discuss each of these matters. Before I do, 
however, I'd like to note that I am surrounded by individuals 
representing organizations whose knowledge and commitment to 
the TSP goes back 26 years. Their knowledge and support have 
been essential in making the TSP the success that it is today.
    Turning our attention to IT infrastructure, it's 
appropriate that IT infrastructure and security are the first 
items cited in your letter. The fiscal year 2010 budget, 
approved by the Board just last month, demonstrates our 
commitment to infrastructure security and other vital record 
keeping activities; $99 million, or approximately 76 percent of 
our total budget, is dedicated to these areas.
    We have an ambitious agenda to improve the TSP. The Thrift 
Savings Plan Enhancement Act of 2009 provides substantial new 
benefits which we must implement. Further, other improvements, 
like updating the TSP Web site and implementing e-messaging 
capabilities, demand agency resources.
    The TSP's expenses are born not by the taxpayers but by 
participants. During 2008, the TSP expense ratio was 2 basis 
points, or 20 cents, for every $1,000 invested by a 
participant. This compares very favorably to other similar 
plans.
    Despite our low administrative expenses, we nevertheless 
maintain a robust IT infrastructure to support activities. 
Attached to my statement is a status report presented by the 
agency's director of automated systems to the Board and to ETAC 
at the joint meeting we held last October. You'll note that 
report covers our recently completed capital investments for 
our systems modernization, as well as a status report on data 
center and software applications.
    On April 29th of last year, I appeared before this 
subcommittee to express the board's support for automatically 
enrolling newly hired employees in the TSP. As the Congress 
developed its legislation on that issue, it added provisions 
which bring the TSP up to date with comparable private sector 
401(k) plans in a number of areas. Together these legislative 
changes make the TSP an even more flexible and valuable 
program. I come before you today to say thank you and to 
describe our plans for implementing these multiple legislative 
initiatives.
    First is immediate agency contributions. As soon as the new 
law was signed on June 22nd, the waiting period for FERS 
employees to receive agency contributions was eliminated. All 
FERS employees should now be receiving agency automatic 1 
percent contributions, and if they are contributing their own 
money, agency matching contributions as well.
    Next is accounts for spouse beneficiaries. Beginning in the 
spring of 2010, if a participant dies and the spouse is the 
beneficiary of the participant's TSP account, the spouse will 
have the option of leaving the death benefit payment in the TSP 
in his or her own name.
    Third, automatic enrollment. Starting next spring, newly 
hired Federal civilian employees will automatically make 
payroll contributions of 3 percent of pay to the TSP. Their 
agencies will send these contributions to the TSP along with an 
additional amount equaling 4 percent of pay, which is made up 
of 1 percent automatic and 3 percent matching contributions, 
each pay period, unless the employee decides to opt out or 
contribute a different amount. This will give new employees a 
chance to start saving earlier, to receive agency contributions 
and potentially reach greater levels of retirement security.
    Fourth is the Roth feature. In 2011, we plan to offer a 
Roth feature which will be the equivalent of a private sector 
Roth 401. This is subject to different tax rules than a Roth 
IRA and open to people of all income levels. Employee 
contributions to the Roth TSP will be made on an after-tax 
basis, and participants will generally not have to pay Federal 
income tax on money they withdraw from it. We estimate it will 
take about 2 years to implement this benefit. It will require 
substantial modifications to agency as well as uniform services 
human resource and personnel systems as well as our own TSP 
systems and their accounting and associated systems.
    The fifth feature is the mutual fund window. This 
legislation allows the TSP to offer a mutual fund window in the 
future. This would allow participants to invest some of their 
TSP savings in mutual funds outside of the TSP. Expenses 
related to the mutual fund window would be born solely by those 
participants who use it. The TSP has not set any implementation 
target or date. We will further consider this operation in 
cooperation with the unions and associations that make up ETAC.
    Mr. Lynch. Mr. Long, you need to wrap it up.
    Mr. Long. The regulatory proposals are simply unused leave. 
That is something which requires a change to FERSA, and we 
would be happy to work with Congress and ETAC in getting that 
done.
    And finally, the limits on interfund transfers. This is a 
policy that we implemented last year based on a very small 
number of participants trading very actively, driving expenses, 
and we've taken steps to eliminate that problem. Thank you very 
much. I'll be willing to take questions.
    [The prepared statement of Mr. Long follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Lynch. Thank you, Mr. Long.
    Mr. Sauber, you are now recognized for 5 minutes.

                   STATEMENT OF JAMES SAUBER

    Mr. Sauber. Good afternoon, Mr. Chairman, members of the 
committee. My name is Jim Sauber. I represent the National 
Association of Letter Carriers, and have served as the 
Council's Chair since 2003.
    The Thrift Savings Plan is an extremely important part of 
the Federal retirement system and is very popular among the 4.2 
million Federal employees and retirees who maintain TSP 
accounts. Protecting the $234 billion invested in the TSP, 
which are the personal assets of our members, is ETAC's highest 
priority. We also use the twice-a-year meetings we hold with 
the Board to address administrative issues and service 
problems.
    At our most recent meeting, on October 19th, we met with 
the entire Board and received briefings on the new TSP Web site 
and the agency's ongoing effort to improve its IT 
infrastructure.
    On behalf of the ETAC, I want to thank you, Mr. Chairman, 
for your leadership in enacting the TSP Enhancement Act of 
2009. Your introduction of H.R. 1263 at the beginning of this 
Congress got the ball rolling with cosponsors from both 
parties. TSP participants very much appreciate the improvements 
in the plan provided by your bill.
    The authorization of immediate TSP matching contributions 
and automatic enrollment will significantly boost participation 
in the TSP among younger workers and increase the level of 
savings among new employees.
    We also very much welcome the legal change that will permit 
the spouses of deceased participants to keep their inherited 
funds in the TSP instead of rolling them over into much more 
expensive plans.
    Many Federal employees will also welcome the Roth option in 
the TSP when it becomes available, especially the hundreds of 
thousands of men and women in the Armed Forces.
    Thanks, again, to all of you who supported these 
improvements.
    Of course, we'll continue to look for new ways to improve 
the plan. One such improvement springs to mind. Recently the 
IRS has ruled that 401(k) participants may contribute the 
dollar value of unused leave that might be forfeited or paid 
out as terminal leave into their plans. ETAC and its 
organizations urge Congress to amend FERS to allow this 
practice in the TSP the next time you take up TSP legislation.
    We also ask this subcommittee to use its influence to 
facilitate the prompt appointment and or reappointment of 
members to the Thrift Investment Board. At present, all five 
members of the Board are serving beyond their terms of office. 
Three of them, Chairman Andrew Saul and members Alex Sanchez 
and Gordon Whiting, have expressed interest in being 
renominated, while two others wish to leave the Board. Although 
all five positions of the Board are Presidential appointments, 
by law, two nominees are recommended by the Speaker of the 
House and the Senate Majority Leader.
    Most of the organizations that make up ETAC have supported 
the renominations of Saul, Sanchez and Whiting, both last year 
with President Bush and this year with President Obama. They 
performed well and have maintained excellent lines of 
communications with ETAC. Congress intended Board members to 
serve staggered terms to promote stability and continuity, and 
we believe it would be unwise to turn over the entire 
membership of the Board all at one time.
    We hope the subcommittee will urge the Obama administration 
to move as quickly as possible on these appointments, and that 
you will encourage the Speaker of the House to do the same with 
respect to her recommended nominee.
    Finally, I wish to conclude by noting that Federal and 
Postal employees have remained committed to the TSP despite the 
severe economic crisis. There is no way to sugarcoat the heavy 
losses experienced by many TSP participants last year. The C, 
S, and I funds all declined by more than 37 percent in 2008. 
Although the equity markets have bounced back somewhat this 
year, many of our members have had to alter their retirement 
plans as a result of these TSP losses.
    One silver lining in the TSP has been the performance of 
the lifecycle funds. Thanks to the diversification provided by 
the L funds, the losses from last year's meltdown on Wall 
Street were somewhat mitigated for those who chose them. In 
fact, the TSP lifecycle funds performed much better than 
similar funds in the private sector. Losses in the TSP's 2010 
fund, for example, were less than half those experienced by 
investors in 2010 funds offered by Fidelity and Vanguard.
    Our recent experience serves to remind us of the wisdom 
shown by Congress when it designed FERS back in 1986 and sought 
to strike a balance between portability and security. TSP is 
just one component of the three-legged retirement stool, and 
thanks to the other two legs, guaranteed benefits from Social 
Security and the FERS basic annuity, the losses incurred last 
year by Federal employees in the TSP will not be catastrophic, 
even for those close to retirement.
    Far too many workers in America have seen their defined-
benefit pensions cashed out, and far too many workers are now 
exposed to excessive market risk in standalone 401(k)'s. 
Millions of workers have suffered a sickening blow to their 
retirement security as a result. We owe it to all of them to 
rebuild America's pension system once this crisis passes. FERS 
would be a good model to emulate. Thank you again for inviting 
me to this hearing.
    [The prepared statement of Mr. Sauber follows:]

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    Mr. Lynch. Thank you, sir. Appreciate that.
    Mr. Cox, you're now recognized for 5 minutes.

                   STATEMENT OF J. DAVID COX

    Mr. Cox. Mr. Chairman and members of the committee, thank 
you for the opportunity to testify today on the policies, 
regulations, and administration of the TSP.
    The Thrift Savings Plan Enhancement Act of 2009 created 
many changes for the TSP. AFGE supported passage of the bill, 
but we did not support all of its elements. We strongly 
supported immediate agency contributions, spousal benefits, 
Roth-type accounts and automatic enrollment for new employees.
    However, establishing a mutual fund window in the TSP is 
another story. AFGE opposed the mutual fund window because we 
firmly believe that the current collection of investment 
options within the program is close to optimal. We believe 
that, in almost every case, Federal employees who would use the 
mutual fund window would lower their overall rate of return on 
their savings.
    Further, it is not the practice of other defined-
contribution programs to allow participants to have such a 
window, largely because it imposes large and unnecessary risk 
and expense.
    One of the main virtues of the TSP is its extraordinarily 
low administrative costs. There is no real benefit for a TSP 
participant to choose to invest in a private mutual fund rather 
than the current TSP funds. Mutual fund fees can eat up half or 
more of an investor's return over time.
    Unless the TSP is able to negotiate comparable cost, fees 
and profits with the investment management companies, AFGE 
believes it's not in the best interest of the plan's 
participants to pursue the mutual fund window option because 
administrators are required as part of that fiduciary 
responsibility to act solely in the interest of the 
participants. AFGE believes that the TSP should not exercise 
its authority under the law to create the mutual fund window.
    An important issue left unaddressed last year was to change 
Title 5 to allow Federal employees to deposit the dollar value 
of unused annual leave into their TSP accounts. Internal 
Revenue Service rules now let private-sector employees 
contribute the value of their use-or-lose paid time off into 
their 401(k) account as long as the employee would be eligible 
to receive the dollar value of the unused leave in a lump sum 
at retirement. Federal employees can convert unused annual 
leave into a lump sum at requirement. Federal employees are 
forced to use or lose annual leave. They are subject to limits 
on the amount of annual leave they can carry over each year. 
When Federal employees retire, they're eligible to receive a 
lump sum of the dollar value of any unused annual leave.
    Unfortunately, in order for the Federal employees to be 
able to take advantage of the current IRS rules regarding the 
deposit of dollars of unused paid leave into their TSP 
accounts, Congress must amend the current law. AFGE joins with 
others in urging the lawmakers to make this important change so 
that Federal employees have the same opportunities for 
retirement savings as their counterparts in the private sector 
and State and local governments.
    When Congress was working to develop the Federal Employees 
Retirement System [FERS], AFGE worked hard to make sure that 
the legislation would require the establishment of an employee 
advisory committee for the TSP so that the concerns of the 
employees who finance the bulk of the plan's assets would be 
heard and considered. The law that was enacted did provide for 
such a forum, and I'm happy to report that the Employee Thrift 
Advisory Committee [ETAC], has operated effectively. It has 
also served to keep Federal employees informed and educated on 
how to make the most of their opportunities under the law.
    We also believe that Federal employees in the investment 
board have benefited immensely from the unions' ability to help 
determine the policy direction of the TSP. Indeed, the ETAC 
works so well for both Federal employees and the TSP program 
itself that AFGE is working to establish a similar employee 
advisory committee for the Federal Employees Health Benefits 
Program, which lacks any means for Federal employee input.
    We firmly believe that with the establishment of an ETAC-
like advisory structure for FEHBP, it might be possible for 
that program to begin to obtain some of the virtues of the TSP 
with regard to efficiency and transparency and accountability.
    The last, Mr. Chairman, is that we believe that TSP has 
been using a lot of outsourcing for its work and would 
encourage the committee to look at the fact that those jobs 
need to be done in-house and provided by government services 
because they are inherently governmental.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Cox follows:]

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    Mr. Lynch. Thank you.
    President Kelley, you're now recognized for 5 minutes.

                  STATEMENT OF COLLEEN KELLEY

    Ms. Kelley. Thank you very much, Chairman Lynch, Ranking 
Member Chaffetz, and other committee members, for being here 
and for the opportunity to testify on recent developments and 
plans for the future of the Federal Retirement Thrift 
Investment Board.
    Our members have been generally pleased with the Thrift 
Savings Plan and with thrift board policy. We have found low 
administrative overhead, good return on investments and an open 
dialog. TSP administrative costs compare very favorably with 
private 401(k) plans. With input from employee organizations 
with informed and prudent leadership by the Board and by the 
TSP managers and with your oversight, we think there are good 
systems in place to aid the TSP in remaining an important part 
of the Federal employees retirement.
    As we all know, the last couple of years have been a very 
volatile time for the TSP Board and for every plan that's tied 
to market forces. And we have heard of the many recent 
advancements and legislative changes to the Thrift Savings 
Plan. As an active member of the ETAC, NTEU has participated in 
policy decisions that affect the fund. NTEU's primary concern 
is protecting the stability and maintaining the viability of 
TSP for our members and for all Federal employees.
    Recent changes made to the Thrift Savings Plan which have 
been talked about include the immediate agency contributions 
and the automatic enrollment provision, and they have been 
noted, and they are very positive development for Federal 
employees. Hopefully, they will help employees to start saving 
for retirement immediately and to maintain or improve their 
savings rate as they move through their careers.
    NTEU worked with the board to make sure that the automatic 
enrollment also includes an opt-out provision so that employees 
can decline to participate if they find they cannot afford to 
contribute.
    The other change that was mentioned that is very important 
of course is the spousal beneficiary account. NTEU has heard 
from several members who are waiting for this option to begin, 
and we believe this is very valuable reform, and we are very 
pleased it was part of the final bill.
    The legislation also created the Roth TSP feature, which we 
have heard about. And this option requires extensive 
modification to both agency and TSP recordkeeping and 
accounting systems. While systems updates will be needed to be 
monitored closely, NTEU views the Roth option as a welcome 
addition to the plan, especially for younger workers.
    However, the board must be prepared to educate the Federal 
work force on the tax planning issues inherent to a Roth 
option, which are not automatically understood or necessarily 
easy to understand.
    And finally, the provision that everyone has talked about, 
this mutual fund window. You know, in the abstract, NTEU thinks 
a mutual fund is a good idea, in the abstract. If a person 
wanted to invest in only socially conscious firms or in gold or 
oil futures, one could do that. Having a variety of funds to 
invest is in a desirable goal.
    ETAC considered this option, and after a wide range of 
views were presented, no consensus was reached. The Council 
believes that the plan has enough diverse accounts within each 
of the five funds. And with the addition of the five lifecycle 
funds, participants have excellent opportunities to earn money 
on their retirement savings.
    On the other hand, we know there have been some 
participants who wanted to invest in certain types of stocks 
that are not available. We look forward to the Board's analysis 
of the cost, the benefit, and the risk associated with mutual 
funds.
    NTEU's bottom line on this is, what is it that is the best 
interest of our members?
    In his weekly address on September 5th, President Obama 
focused his remarks on reviving the economy and creating 
incentives to save. One of those initiatives was to allow 
employees to invest their employer payouts for unused leave 
into their retirement plans, as we've heard. On behalf of our 
members, NTEU contacted both the IRS and the Thrift Board to 
inquire whether or not this could be applied to Federal 
employees. Many of our members carry over their maximum amount 
of annual leave on a yearly basis, which is capped at 240 
hours, so this could significantly boost their TSP accounts.
    But both the IRS and the Thrift Board have indicated to 
NTEU that in order for Federal employees to take advantage of 
President Obama's initiative, legislation would be needed to 
amend the Code. While NTEU is continuing to pursue this option 
along with others, we ask for your help, Mr. Chairman, and for 
this subcommittee in working together to write and to achieve 
passage of such legislation.
    In closing, we appreciate your oversight of the TSP. It is 
an important part of the Federal retirement. We need to make 
sure that the Board is working to ensure that all participants 
understand the changes taking place within the TSP, most 
importantly the Roth option and the new spousal benefit. 
Employees need to be able to make informed choices.
    There must be a careful and deliberate review before any 
changes such as the mutual fund window are added. The No. 1 
goal is to ensure stability, integrity, and cost efficiency in 
the TSP so that, as this hearing title today states, the fund 
will thrive and our retirees will prosper. Thank you, and I'm 
glad to answer any questions you have.
    [The prepared statement of Ms. Kelley follows:]

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    Mr. Lynch. Thank you.
    Ms. Baptiste, you're recognized for 5 minutes.

                 STATEMENT OF MARGARET BAPTISTE

    Ms. Baptiste. We are proud of NARFE's work with Congress in 
1986 to create the Thrift Savings Plan. Indeed, by any measure, 
the TSP has been a huge success.
    Despite the current volatile financial market, we believe 
the Federal Retirement Thrift Investment Board has continued to 
perform admirably.
    Unfortunately, many TSP participants have had losses during 
this downturn. Federal workers years away from retirement 
should have time to recover. But employees at or near 
retirement don't have that luxury. Most of them will either 
retire with a smaller nest egg or work until the market 
rebounds.
    Retirement plans were created so that employees could avoid 
working into old age and also to make room for younger workers 
to take their places. As employers have migrated away from 
defined-benefit annuities to defined-contribution savings 
plans, the burdens of retirement liabilities and risk have been 
shifted from employer to employee. But the purpose of 
retirement programs are negated when workers cannot afford to 
retire until they make up for lost gains.
    Fortunately, the retirement security of FERS workers is 
diversified with the three-legged stool of the TSP, a 
relatively modest annuity, and Social Security benefits. In 
1998, a proposal was made which undermined the FERS annuity and 
diverted the agency and employee contributions for it to a new 
and separate fund within the TSP. This was and is a bad idea 
because it threatened the defined benefit of the FERS 
retirement stool which, as evidenced by the recent market 
slump, has become an essential safety net for FERS workers. 
Still, the FERS annuity lacks the full inflation protection 
afforded to CSRS workers.
    That's why NARFE supports COLAs for all federally 
administered retirement programs. What's more, for some Federal 
workers, the Social Security leg of retirement is eroded by the 
so-called windfall elimination provision or WEP. NARFE supports 
H.R. 235, legislation to repeal the WEP and the related 
government pension offset.
    For years we have worked to improve the TSP by conforming 
it to 401(k) plan rules and by adding new features to the TSP, 
which are consistent with the program's investment philosophy. 
With your help, Mr. Chairman, we are pleased that several TSP 
improvements became law in June. For example, the most 
important enhancement in the program's history was made when 
newly hired Federal employees were automatically enrolled in 
the TSP, provided an immediate matching contribution. Now more 
Federal employees will be better prepared for their retirement.
    NARFE supported adding a Roth option to allow participants 
to make after-tax contributions to the plan and withdraw their 
earnings tax-free upon retirement. In addition, we are happy 
the new law will give surviving spouses the same rights over 
their inherited accounts as any other TSP participant.
    Beyond these improvements we are concerned about the new 
self-directed option to allow participants to invest their 
accounts in funds outside the TSP. Indeed, the administrative 
costs incurred by funds beyond TSP are usually much higher and 
many lack the reduced risk and proven long-term performance of 
TSP's well diversified index funds. For that reason, NARFE 
fears the participants could take on too much risk. We urge the 
Thrift Board to consider limitations on funds invested outside 
of TSP to ensure that participants do not put all their eggs 
into one basket.
    Some have said the self-directed option was included to 
placate interests in offering single-sector funds in the TSP. 
The Thrift Board has advised against adding such funds because 
they conflict with the program's diversified investment 
strategy. NARFE agrees, and we urge Congress and the Thrift 
Board to base fund decisions on carefully crafted objective 
financial analysis and not politics.
    Still, more must be done to advance the program further. As 
has been said, President Obama said that employees should have 
the option of putting payments for unused leave into their 
401(k)'s. As a matter of equity, NARFE believes that Federal 
workers should have this choice if it is offered to private-
sector employees. NARFE also supports a proposal to allow 
Federal workers to contribute bonuses into their tax deferred 
accounts.
    And while NARFE seeks the means to maximize retirement 
savings, we are concerned that the Federal Government does not 
do enough to educate its own workers saving for retirement.
    We commend you for your interest in making the Thrift 
Savings Plan continue to thrive. And thank you for inviting us 
to testify.
    [The prepared statement of Ms. Baptiste follows:]

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    Mr. Lynch. Thank you.
    Mr. Strombotne, you are now recognized for 5 minutes.

                STATEMENT OF RICHARD STROMBOTNE

    Mr. Strombotne. Chairman Lynch, and distinguished members 
of the subcommittee, I want to thank you very much for the 
opportunity to testify before this subcommittee on the 
perspective of the Senior Executives Association relating to 
the Thrift Savings Plan.
    For the past 10 years, I have served as the representative 
of the Senior Executives Association on the Employee Thrift 
Advisory Council. I served as the chairman of SEA's Task Force 
on Retirement Issues during the mid-1980's, when both the 
Federal Employees Retirement System and the Thrift Savings Plan 
were created. And I spearheaded SEA's efforts to ensure that 
CSRS employees could contribute 5 percent of their salary to 
the Thrift Savings Plan. And SEA has participated as a member 
of the Employee Thrift Advisory Council since its inception.
    The Thrift Savings Plan has not been a static retirement 
plan. ETAC and its members have worked together to consider and 
implement new offerings to upgrade the Thrift Savings Plan and 
make it more useful to its employees. Over the last decade, 
such upgrades, including adding the small cap and international 
funds to the original G fund, large cap and fixed-income funds, 
and adding the option to invest in the lifecycle funds, and 
providing access to Thrift Savings Plan participants, assuring 
that they can easily access information about their plan and 
access the account to manage their contributions.
    The new features that significantly upgrade the Thrift 
Savings Plan were signed into law by President Obama, and SEA 
supports the passage of many of these features and believes 
that they will provide long term benefits.
    Much has been said already about the Roth option, and I 
would applaud that, as well as the automatic enrollment of new 
employees.
    But I want to take just a moment to talk about the 
beneficiary accounts for the surviving spouses. Prior to this 
change, the spouses of deceased Federal employees had a choice 
of receiving a payout of the Thrift Savings Plan account in a 
lump sum or transferring the money into a rollover IRA. Neither 
of these options was ideal as the lump-sum payment had tax 
consequences and the rollover IRA had higher administrative 
costs than the Thrift Savings Plan, as you've heard. And the 
new law allows spouses who are the beneficiary of an account to 
keep the funds in the Thrift Savings Plan and become the 
managers of these accounts. It also relieves them of having to 
make an important financial decision in a time of grief. This 
was pointed out to me by one of the members of ETAC, and I 
think it's a good point to make.
    As the ETAC member who proposed this addition to the Thrift 
Savings Plan, I was very happy to see it become law and very 
pleased with the Federal Retirement Thrift Investments Board's 
prompt efforts to support its purpose. And Director Long 
reported at the joint meeting of the Board and the Council on 
October 19th that it's already being used.
    On the mutual fund window, SEA has concerns about the 
mutual fund window. It's necessary to study this option further 
to determine whether the cost of implementation is feasible and 
practical. We have a concern about the likelihood that this 
would overburden already strapped human resource and personnel 
offices. And it's not at all clear that participants have the 
necessary investment expertise that would be needed to use a 
mutual fund window effectively because it's a riskier 
investment than traditional funds.
    With that in mind, the Senior Executives Association urges 
the Thrift Investment Board to take a cautious approach to 
opening the newly authorized mutual fund window.
    As to looking for ways to improve the Thrift Savings Plan 
in the future, there are two that we think would be very 
useful. One is to provide the opportunity for employees who 
receive bonuses and performance awards to contribute those in 
one--some amount; 1 percent ranging to 100 percent directly 
into the Thrift Savings Plan. Military members can do this 
already, but it's not available for civilian employees. The 
bonuses are an important part of the compensation package, 
especially for members of the Senior Executive Service, and the 
amount of money that a senior executive can contribute to their 
Thrift Savings Plan is reduced compared with the employees in 
the GS system. So we recommend that bonuses and performance 
awards be included as allowable deposits.
    And now, when employees retire, they receive lump-sum 
payments for their unused annual leave, and they cannot make 
this, cannot use this as a payout, cannot use this payout to 
make a deposit. I had the experience of talking with one 
Federal retiree, a woman who retired late in the year. She 
received a payout of her annual leave in a lump sum. When she 
received the payment----
    Mr. Lynch. Mr. Strombotne, I just have to let you know 
you're way over your time.
    Mr. Strombotne. I'm sorry. Yes,I will conclude.
    Mr. Lynch. I appreciate it. Thank you.
    Mr. Strombotne. I'm through.
    Mr. Lynch. I didn't mean to cut you off.
    Mr. Strombotne. Well, let me finish that one story. Because 
the woman, when the lump-sum payout was added to her salary she 
already received, it meant that she went over the means test 
for Medicare, and so her Medicare premiums went up as a result. 
And that's the final story.
    [The prepared statement of Mr. Strombotne follows:]

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    Mr. Lynch. Thank you, sir.
    Colonel Hayden, you're recognized for 5 minutes.

              STATEMENT OF COLONEL MICHAEL HAYDEN

    Colonel Hayden. Mr. Chairman, distinguished members of the 
subcommittee, on behalf of the 375,000 members of the Military 
Officers Association, I'm grateful for the opportunity to 
present testimony on MOAA's views of recent legislative changes 
to the Thrift Savings Plan and potential other enhancements 
that could benefit uniformed service members and their 
families.
    The Thrift Savings Plan Enhancement Act of 2009, part of 
Public Law 111-31, signed into law in June of this year, 
included two noteworthy provisions for uniformed service 
members and their families, provisions that had MOAA's full 
support.
    The first provision made some modest future increases in 
payments to military survivors affected by the offset of DOD's 
Survivor Benefit Plan by VA's dependency and indemnity 
compensation. The second provision, which is the focus of my 
testimony today, authorizes currently serving uniformed service 
members and Federal civilian employees a Roth savings option 
under the Federal Thrift Savings Plan, a provision we have been 
advocating for since the advancement of the Roth 401(k) in 
2006.
    MOAA strongly supports a Roth TSP option under which 
participants pre-pay taxes on their contributions but watch 
their Roth savings grow tax-free and enjoy tax-free withdrawals 
in retirement. Providing a Roth option will be especially 
attractive for young service members in lower tax brackets, as 
well as career military people who receive part of their 
current pay as tax-free allowances but can expect to have 
taxable retirement annuities.
    MOAA believes providing a raw TSP option for currently 
serving personnel is an equitable and enlightened action which 
will improve their long-term financial security. The family of 
our service members surely deserve this option in light of 
their contributions to our Nation.
    Since the passage of the act, we are grateful that the 
Thrift Savings Plan Web site has taken a very proactive 
approach by posting two informative fact sheets: one outlining 
the legislative changes to the Thrift Savings Plan for Federal 
employees and service members, and another that provides 
frequently asked questions and answers.
    The Q&A fact sheets makes the following key statements MOAA 
intends to follow closely during the upcoming implementation 
period. The first is that uniformed members and Federal 
employees could see a Roth TSP implementation as early as 
January 2011. The second outlines that there will be no income 
restrictions on Roth TSP contributions. And finally, the third 
outlines the Thrift Savings Plan will develop a plan to educate 
eligible users on the relevant advantages and disadvantages of 
the Roth versus regular TSP. We believe this third bullet is 
crucial. Service members must be provided concise decision 
information in order to determine if a Roth TSP plan is right 
for them.
    As for other TSP recommendations, we suggest a TSP 
conversion. As was the case in the late 1990's when a Roth IRA 
was first introduced, we recommend that with the implementation 
of a Roth TSP, military and Federal employees should be offered 
the option of converting some or all of their existing TSP 
accounts to Roth TSP accounts, regardless of their modified 
gross income.
    Providing a conversion option is a win-win for both the 
participant and the Federal Government, especially in the 
current national deficit environment. Participants win by 
having the option to convert, pay taxes now, and have their TSP 
earnings grow without tax liability upon withdrawal. 
Additionally, the Federal Government wins by garnering more tax 
revenues now upfront.
    Additionally, MOAA supports a change either in policy or 
law that would allow uniformed service members to enjoy the 
same TSP contribution options that Federal employees presently 
enjoy. Currently, service members can only elect a whole 
percentage option for TSP contributions. Federal civilian 
employees have the option to contribute either a dollar amount 
or a percentage of a pay. We believe that providing a fixed-
dollar amount option would simplify the process for the service 
members.
    Finally, as stated before, we believe a thorough education 
plan will be instrumental to ensure the Roth rollout is 
implemented most effectively. Therefore, MOAA recommends that 
TSP bring affected agencies together, to include Federal 
agencies and military and veteran service organizations, in 
roundtable discussions to assist in developing the rollout 
education plan and necessary rulemaking policy. We feel a 
collaborative effort will produce a much more comprehensive 
result.
    So in conclusion, MOAA is grateful to the subcommittee for 
its leadership on this issue and for the commitment of both 
Congress and the Federal Retirement Thrift Investment Board to 
provide this much-needed savings option for Federal employees 
and uniformed service members.
    We look forward to assisting in the upcoming policymaking 
and subsequent rollout as well as to your questions.
    [The prepared statement of Colonel Hayden follows:]

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    Mr. Lynch. Thank you, Colonel. I now want to recognize 
myself for 5 minutes. I want to say at the outset that I am 
very happy with the way the Thrift Saving Plan works as a 
participant. That is my own assessment. And I think it is very 
good. I agree with the testimony that it has been a great 
success. On a scale of 1 to 10, I would give it an 8.
    There needs to be some improvement. For instance, the Web 
site. In the video game world, your Web site is Pong. It is 
simple, I understand that. It is very simple, it is very basic, 
very utilitarian, but we can do better, I think. And I know you 
are already undertaking that, but I do think that it could 
stand some improvement.
    I'm just going to go with the issues that have been laid 
out in your testimony, some of it. As far as using unused 
annual leave for deposit, I think that is a great idea because 
it is out there already and for the IRS and has approved it, 
anticipating putting it in the participating bill. I talked to 
the ranking member. He's receptive to it. So we'll try to get 
it. We'll probably move forward with that when I get more 
assistance from the other members.
    Also Mr. Cox, your comments regarding a similar advisory 
group and that sector, as you have here--because it has worked 
out so well--is also something that I would be willing to look 
at, and I think it would be welcome.
    Let me just say the one issue that has introduced some 
controversy and difference of opinion here has been the idea of 
a mutual fund window. And I understand both of the arguments, 
but I think there might be a way to address all of those 
concerns and still allow some flexibility here. And that might 
be--I am just suggesting--limiting the amount that any person, 
any participant, might be able to venture in this window, 
whether it is a third of what they have. I think there's the 
real possibility of limiting what's available through the 
window.
    In other words, it's not the whole world of mutual funds 
there, but there might be the ability to screen the cost 
structure that the union representatives have raised and also 
some of the retiring representatives raised about making sure 
that the cost structure there is not prohibitive. In other 
words, to participate and be eligible through that window, you 
have to bring the costs down. And I think having $224 billion 
in the fund gives a certain amount of bargaining power to the 
TSP to put out that RFP to some of these funds that might offer 
these packages.
    So I think there's some protections that we might introduce 
if we were going to go forward with this. But they have to be 
consistent with protecting the retirement of the participant. 
We can't just have people out there, day trading. That would be 
inconsistent with our overall mission.
    And last, the conversion question that you raised, Colonel 
Hayden, about converting existing TSPs to Roth, I think that is 
a very interesting issue and I think the more that Roth becomes 
available out there, I think that issue will percolate. So it 
is going to take some thought, I think. So I think it is very, 
very interesting and worthwhile in discussion.
    Let me ask this. I know I am down to the end of my time. 
But Mr. Long, the idea of TSP was really, I think, structured 
on buy-and-hold. Buy-and-hold. That was my strategy, 
unfortunately, during this whole economic downturn. And is that 
something that we need to move away from, or is that something 
that we can move away from and still maintain the protection 
and adhere to the central purpose of the TSP?
    Mr. Long. The policy that's been in place now for over 20 
years I don't think needs change. The structure of the TSP and 
the policies behind it I do not think need to change. The vast 
majority of participants appreciate the fact that we have a 
small number of easily understood investment options, the vast 
majority of them buy-and-hold. And I don't think that is going 
to change, nor do I think it should.
    I think this leads up to the question of the mutual fund 
window: Is it appropriate, can we figure out a way to make it 
work?
    And there are a small number of participants that will, I 
think in perpetuity, if the structure doesn't change, will 
always say, well, we should have the gold fund, the real estate 
fund, the socially conscious fund--and there's an unending list 
of the whatever fund, fill-in-the-blank.
    If we seek a way to come up with solutions for the small 
portion of the population, without doing anything to change 
what affects the other 98 percent of participants that won't 
use it, a mutual fund window is a way to get there. You can 
structure it in such a way that the cost of a mutual fund 
window, the people who use it are the only people who pay for 
it. The people who don't use it don't pay a nickle for it. That 
is critical.
    And we certainly have anticipated that we would limit the 
total amount of a percentage of an account that could go there. 
The exact number, whether it's 50 percent or 25 percent is 
certainly up for debate. But the fundamental policy of the TSP 
simplicities should not change.
    Mr. Lynch. Thank you. I yield to the ranking member for 5 
minutes.
    Mr. Chaffetz. Thank you, Mr. Chairman. Thank you all for 
your testimony and for your comments.
    Let me mention about the mutual funds, at least as an 
approach, I would suggest that the idea of choice is a good 
one, that the individuals in different stations in life, have 
different backgrounds, whether they have inherited certain 
things. There's such an unending array of possibilities that I 
think that the idea that they could be properly educated in 
understanding the risk; that they're not just going on, you 
know, making a quick decision that 15 years from now they may 
regret. They can also understand the risk and reward. Maybe 
they want to be a little more aggressive.
    I would hope and encourage and support efforts to move down 
that path in a cautious way, but at the same time ultimately 
allowing the individual some degree of choice. And I would 
support that push on the mutual--at least from a mutual fund 
point.
    Mr. Long, I am a freshman. I am trying to understand these 
issues and dive deeper into this. You made quite an assertion 
about the low administrative costs, and I've certainly heard 
that far and wide, but it is also my understanding that many of 
these costs are deferred, if you will, and pushed over into, 
for instance, Treasury and other groups. Well, you are not 
actually having the expense; actually, the taxpayers of the 
United States are having those expenses.
    Can you help me understand how self-sufficient and cohesive 
this group is, and what percentage and what dollars you're 
talking about are actually shared assets in the Federal 
Government, which are hopefully shared by all the people in the 
United States, not just the TSP?
    Mr. Long. The TSP does rely on human resource personnel 
throughout the government. Every agency has a certain number of 
personnel specialists that are required to pass out 
information.
    Mr. Chaffetz. Going macro here on you, do we have a sense 
of we're budgeted for this amount of money and it takes this 
percentage of----
    Mr. Long. No is the short answer, and I do know that one of 
my predecessors was asked this question years ago. They were 
not able to get to an answer and thought it was--we were 
chasing our tails.
    Mr. Chaffetz. Our time is short. I have 5 minutes, and I'm 
sure we can go a couple rounds.
    At some point I think that is important to understand--the 
self-sufficiency, again, in the grand scheme of a $3.9 trillion 
budget. But to me, allowing the participants to pay for the 
administrative costs I think is an important one. We are at a 
time when we are $12 trillion in debt, and certainly we are not 
going to nitpick little things. But at the same time, I think 
the principle of self-sufficiency is an important one.
    I would love to followup with you and try at some point to 
tackle that number, if that is OK with you.
    Mr. Long. Yes.
    Mr. Chaffetz. Even if it is not, I would still like to 
pursue it.
    The implementation of the Roth-type option, why does this 
process take so long? We are talking about a 2-year window. It 
can't be that complicated.
    Mr. Long. Yes, it is. This is an enormous project.
    Mr. Chaffetz. Explain to me why it takes 2 years to try to 
implement something----
    Mr. Long. I'll just explain the payroll side, which has 
nothing to do with us.
    All throughout the Government, payroll is done. Multiple 
agencies do payroll. Anytime you have moneys that are taken out 
through the TSP--just like any 401(k)--those are pretax 
dollars, so the paycheck is reduced, your taxable income for 
that year is now reduced.
    Now, all of a sudden, those payrolls are going to do 
changes and say, OK your paycheck is reduced, but a portion of 
that which is pretax--standard 401(k)--reduces your taxable 
income. But the other amount that is still going to go to the 
401(k) plan is going to be Roth, so it is going to be removed 
from your paycheck but included in your taxable income. Just 
from a payroll side only, that is an enormous change. From our 
standpoint, we are right now implementing software changes for 
our systems to be able to accept that.
    You've got recordkeeping changes, you've got communications 
changes. It is a really big deal. It is what it boils down to. 
The other changes on immediate contributions, also a big deal, 
but we are able to do it quickly. Automatic enrollment, a big 
deal, but not half as big as Roth. Roth is an enormous project.
    Mr. Chaffetz. Are there ongoing challenges, is there there 
any way to speed up the timeline? Will you please let us know?
    You stated in your testimony, Mr. Long, that the I fund 
incurred trading costs from roughly $16.5 million in 2007 and 
only $2.1 million in September. Just give me a sense of what's 
happening there. Is that because the economic environment has 
dwindled, or what are the factors that are there?
    Mr. Long. We had a small group, less than 1 percent of the 
total TSP population that were effectively active traders. They 
were moving large amounts of money back and forth. So, a small 
population making large transfers on a daily basis. So every 
day, we bundle up all of our total trades and submit a net 
trade to our investment manager. It gets either buy or sell. It 
gets executed every day. That comes with a cost. You have to 
execute those in a different market.
    By moving to a policy which we no longer permitted 
unlimited transfers back and forth--we set a policy where two 
per month unlimited--reduce the trading activity, therefore 
reduce the volume of the trades that we submit in the market 
each day, therefore drastically reduced our expenses.
    The bottom line is now everybody else, all 4.2 million 
participants, have a little bit less in total trading expenses 
because of our policy change to restrict a small number of 
participants.
    Mr. Chaffetz. Thank you, Mr. Chairman. I know my time is 
up.
    I don't want to take any more time from Mr. Connolly, 
because I know he wants to get home in plenty of time to watch 
the election results of the races in Virginia.
    Mr. Lynch. Thank you very much. I'm not sure he's going to 
be pleased with the results.
    The Chair recognizes the gentleman from Virginia, Mr. 
Connolly, for 5 minutes.
    Mr. Connolly. It must be nice, Mr. Chairman, to come from a 
political culture that's unidimensional. We enjoy our political 
competition in Virginia.
    Thank you, Mr. Chairman.
    Let me ask, Mr. Long--and I'm going to ask Mr. Long once 
again to speak into the microphone. I cannot hear you.
    Tell me what the desirability is, from your point of view 
at least potentially, of a mutual fund window.
    Mr. Long. The likelihood of how many participants would use 
it? I assume in the single digits. It would be somewhere 
between 1 and 4 percent. It would be small.
    Mr. Connolly. Given the concerns you've heard raised at the 
table, if it is only 1 to 4 percent, why do we want to pursue 
this?
    Mr. Long. Well, we want to get from an 8-out-of-10 to a 9-
out-of-10, and eventually a 10-out-of-10.
    What you find is you have a small but very vocal group of 
disaffected participants. And in the end, do you want to 
provide solutions that help everybody?
    What we can do here is for the participants that say I am 
very unhappy because I can't execute my desired trade in an 
equity fund that does not invest in oil companies, that does 
not invest in tobacco companies, that does not invest in 
companies that support non-democratic regimes, or does not 
permit me to execute my investment belief that Japanese 
airlines are going to be the best investment in 2010.
    If we want to create a method by which those participants 
can execute their investment beliefs, a mutual fund window is a 
way to get that done. It is generally recognized by the 
consultant community that the ideal 401(k) design is a core 
group of small, very broadly diversified funds, exactly what we 
have today in five funds, plus a small menu of life cycle 
funds, which we have today. And then add to that, for the small 
group of self-directed, for the people that are on the 
frontier, offer them a window to execute their own independent 
beliefs. That is a way to get it done.
    We are not doing anything to move forward unless the 
members of the ETAC, as well as the board--which both, by the 
way, have divided opinions on this. Until we get those two 
groups together, we are not doing anything on this.
    Mr. Connolly. Mr. Cox, you heard that. What's wrong with 
that approach?
    Mr. Cox. It is my job as a union representative to be 
concerned about the risk for our members. I would say maybe 
many Members of Congress come from a background that is a 
financial background and are very savvy with their ability to 
invest, as well as some other Federal employees. I would say 
out of AFG's membership nationwide, many of whom are 
housekeeping aides, nursing assistants, nurses, correctional 
officers, those people, they are not that savvy about 
investing. They want solid core funds that are dealing with 
their retirement.
    People still have the option to go out and invest their 
moneys any way they want to in this country and to buy all type 
of stocks and mutual funds and anything else they want to 
invest in.
    But we are talking about protection of people's retirement 
security and the better good of the whole. Even though we talk 
about only 1 percent today, there's predatory lending that's in 
this country, there's predatory marketing to Federal employees 
about various things.
    So I just think it is a concern that we have of protecting 
our membership and that 99 percent of them.
    Mr. Connolly. Mr. Long, Mr. Cox talks about some inherent 
risks with going further abroad on the kinds of investments 
that are allowed in TSP. If we had opened up TSP to the REIT 
investment that had been advocated when real estate was at its 
height, what would have happened to people's investments?
    Mr. Long. They would be very unhappy.
    Mr. Connolly. They would be very unhappy.
    Mr. Long. I know there was a proposal to create a real 
estate investment trust fund, and it has been over the last 
year extremely volatile, and, as you noted in your comments, 
for a period of several months basically fell off the cliff. 
Yeah. If we had a fund at that point, yes, I think the 
participants in that would not have been happy.
    What we are talking about here is something different, it 
is not creating a new core fund, but creating a window by which 
a small number of participants, with the appropriate 
protections, to say before you go through this window 
understand there are risks, there are expenses, this is not for 
the novice investor. But if you choose to invest a portion of 
your money in a mutual fund through this window, you can do so.
    Mr. Connolly. Thank you. My time is up, Mr. Chairman.
    Mr. Lynch. Let me ask the participant representatives, from 
Mr. Cox all the way down to Colonel Hayden--and you've each hit 
on this a little bit--the need for education, the fact that we 
have a diversity of financial education within the people that 
we're serving here. We are going to have to have it with the 
Roth IRA, that is going to have to be explained already, for 
what we are doing already. It is very likely that the payment 
of unused leave time, the bonus issue, how do we get out there? 
What's the best way, in your experience in representing 
participants, to get that message out, make sure that people, 
to the degree possible, are educated about the options here? 
That would be especially difficult with the mutual fund piece 
because that can be complex for the best of us. How do you 
think we might best accomplish that educational function that's 
going to have to happen in any event?
    Mr. Long. I would suggest two things. One is the Web site 
which you had previously mentioned. More and more investment 
companies use those Web sites as very effective educational 
tools. That needs to be developed, as you said, more than it is 
today. That is one way.
    The real issue, I think, for a lot of employees is they 
need someone to talk to, they need someone to be able to ask 
questions of. And one of the things that has complicated this 
in recent years is that used to be and should be the function 
of Human Resources in the agencies. And more and more agencies 
are centralizing their Human Resource functions and pulling 
them away from the employees who are out there in the cities 
and towns across the country. So they're not even there.
    And, as importantly, new agencies like TSA are contracting 
out all of their human resource work.
    So I would see the need for some kind of an outreach from 
the board to agencies and to Human Resources, because there has 
to be some face-to-face opportunity for people to ask questions 
about these things. They're very important decisions, and 
everyone is at a very different level of what they're confident 
in and what they're able to absorb to make these choices. 
Otherwise, they're going to stick with the simplest and the 
most straightforward, and they're going to be afraid to take 
advantage of some of the things that Congress passed this past 
summer, because they won't know how to do that.
    Mr. Lynch. I am anticipating that, Mr. Long, you have 
already thought about this with respect to the Roth IRA and 
some of the other things. How are you proposing this rollout? 
How is this going to happen?
    Mr. Long. We are actually doing some research on that right 
now, trying to figure out what the rest of the world is doing 
as far as advertising the Roth 401(k) provision in large 401(k) 
plans. It is a complicated choice. You move from just talking 
about basic investment principles to effectively talking about 
tax minimization strategies. Trying to communicate that to 4.2 
million people is going to be a challenge.
    There are mechanisms for how to get that done. Certainly we 
will be relying on the Web site. Certainly we will be relying 
on the human personnel specialists.
    But Colleen Kelley is exactly correct. We know that we work 
with the Human Resource professionals, and they're stretched 
thin. And that is a challenge that we work with every day. We 
work with OPM as well, because they're the party that is 
primarily responsible for making sure that the government has a 
financial readiness program. We partner with them, and through 
them and the personnel specialists, but there are challenges 
there.
    Ms. Baptiste. Federal employees need to hear from 
professional financial advisors because, as Ms. Kelley has 
said, Human Resources staff don't necessarily have this 
expertise and they are stretched beyond all knowledge. They do 
not have the time to cope with--they don't have the time to 
counsel people who are retiring. They don't have the expertise.
    I agree, we need a better Web site. We need much more 
information. It's a tricky subject.
    Mr. Cox. Mr. Chairman, I think I would agree with my other 
colleagues. I believe it is that personal touch. I go back to 
my own years working for the Federal Government. I went to 
Human Resources. I got counseling there. I was one of the first 
participants in the TSP back in 1986, and it was because there 
were HR people that were present that could sit down and talk 
to me about it.
    And I remember the HR person saying to me, put that 5 
percent right up front, boy, because you will get that matched. 
But let me tell you something else; each year when you get a 
raise, up it another percent, keep going on up, because you 
will want to retire 1 day, and you have to start preparing 
early.
    I still remember that advice, and it didn't come from a Web 
site or it didn't come by osmosis. It was a person counseling 
me, probably not on a printed brochure, but it was very, very 
sound advice.
    Mr. Lynch. Right. Thank you.
    Mr. Connolly, you are now recognized for 5 minutes.
    Mr. Connolly. Thank you, Mr. Chairman. Mr. Long, are there 
differences between CSRS and FERS with respect to TSP?
    Mr. Long. Absolutely, primarily in terms of the government 
contribution. The CSRS contribution is voluntary. There is no 
government contribution that goes along with it. For the FERS 
employees they have the 1 percent automatic and then the 
matching contribution in addition.
    Mr. Connolly. What is the rationale for differentiating 
between the two?
    Mr. Long. The basic annuity.
    The annuity for the CSRS is more generous, and for people 
hired after 1983 they continue to have an annuity but it is 
less generous. And along with that, TSP was created, and they 
also are eligible for Social Security. So you have a three-
legged stool for those under FERS.
    Mr. Connolly. Have we looked at the actuarial cost of the 
Roth conversion that you talked about?
    Mr. Long. I don't think I talked about the Roth conversion. 
I think the gentleman down at the end of the table talked about 
the Roth conversion.
    Mr. Connolly. I am just wondering if we have done some cost 
estimates of what are the implications?
    Colonel Hayden. Our organization has done no cost analysis 
associated with that, again, as we see this as more of a win-
win for both the Federal Government as well as for the members 
because the revenues would be coming back to the Federal 
Government immediately.
    That's the option that we were looking at as having some 
type of conversion.
    Mr. Connolly. Colonel Hayden, folks in the military, are 
they subject to the same kind of rule as CSRS employees with 
respect to the match, the 1 percent?
    Colonel Hayden. It is my understanding they're more tied 
toward just the annual contributions, the 16.5 or the 49,000. 
We do have the limitation associated with the 49,000 if they 
happen to be in a combat zone. So you can take up to that 
amount on top of the 16.5 if you are in a combat zone, and that 
was a provision in law.
    Mr. Long. The members of the uniformed services are not 
eligible for any government contribution, again, with a similar 
strategy. They have a pension, a 20-year pension, which is 
considered to be attractive and that is their primary source of 
retirement income.
    Mr. Connolly. Are you aware of the fact the ranking member 
of this full committee had an amendment that would allow the 
military to qualify for a match similar as FERS employees?
    Mr. Long. No, I was not.
    Mr. Connolly. It might be worth your costing out the 
implications of such an amendment .
    Mr. Long. There is one thing that I do need to make sure 
people are clear on: that the Roth TSP, which will be similar 
to a Roth 401(k), that is meaningfully different than a Roth 
IRA. My understanding is that the IRS does not permit, and 
we're aware of no 401(k) plans that permit people to take their 
401(k) contributions and convert them to Roth 401(k) 
contributions. I believe, according to the data I got from the 
IRS, it's not permissible under tax law.
    What is permissible today is conversions of Roth--of 
regular IRAs and Roth IRAs. The thinking behind it might be 
similar, but inside the qualified plan, it is not permissible 
today.
    Mr. Connolly. Ms. Baptiste, I didn't ask you for NAR's 
position, but what is NAR's position on creating new investment 
windows, especially maybe a mutual fund window?
    Ms. Baptiste. We believe it is a little risky without a lot 
of--there's some--people do not have enough information and 
education. They're really looking at going into retirement with 
some solid money, and this is much riskier.
    Mr. Connolly. Thank you. Thank you, Mr. Chairman.
    I guess when we look at this kind of issue, we have to 
balance the rights of individual members to take risks with 
their own money. On the other hand, when we are looking at 
something that is a retirement fund, we have to balance that 
out.
    Not so long ago, the previous administration had strongly 
suggested the idea of desegregating part of the Social Security 
payment and allowing folks to invest in the market because it 
would grow so much more healthy. Of course, had folks done 
that, the weeping and gnashing of teeth in the opening of those 
401(k) statements today would be magnified by many fold, and an 
awful lot of folks would find their retirement security in 
jeopardy. So it is a very serious policy question and one I 
know we will be debating for some time.
    I thank you all.
    Mr. Lynch. I know some of this sounds paternalistic or 
maternalistic that we're trying to protect some of the 
participants here. But I think that we have to realize that if 
you do something--let us take the mutual fund window piece of 
this. It's not just that participants going out through the 
window, it is retirees being bombarded with marketing 
information that might be more driven by profit and fees than 
by best serving the retirement needs of the individual. So I am 
concerned about that.
    Colonel, I want to ask you, you've got flag officers, 
you've got field officers, you've got junior officers versus 
noncommissioned officers. The education piece, this has to be 
considerably more complex in your situation as opposed to an 
agency. You've got folks in much different circumstances. Do 
you have any specific concerns about being able to go out and 
educate?
    I have been in Iraq and Afghanistan so many times, and 
those folks are on the Internet all the time. They're on more 
than I am, and much more savvy than I am in that respect. But 
you've got such a wide diversity of position and circumstances, 
as well as financial education within the group that you 
represent.
    Colonel Hayden. It is an interesting scenario. When the 
actual TSP option was first offered to the uniformed services, 
I was actually at the Pentagon at the time in a role of sitting 
in the J-1, trying to figure out exactly what this TSP option 
was going to provide. So the education piece was even critical 
when we first had the option of participating.
    This now provides even a broader base, depending on your 
financial situation, depending what your tax bracket is going 
to be. It's going to be even more critical for a junior troop 
to have an understanding of what they intend to have as their 
taxable income in retirement compared to their taxable income 
that they're currently looking at.
    And then when you throw in that some of these folks are 
deploying into the combat zone, getting tax-free benefits as it 
is associated with it, how generous that can actually be when 
it comes to actually just contributing to the TSP, its 
important.
    What took place then, and what I would hope will take place 
before the rollout of the Roth option, is that the services 
will do, once again, we call them road shows. We would take our 
HR personnel, get them smart on the issue, go out and have 
mandatory fund--mandatory formations, where you would have to 
go out and get the briefing, so that you had an understanding 
of exactly what this was being provided to you. And we have 
that option with the uniformed services to do something just 
like that.
    The Web site is going to be critical, because as you say, 
the younger troops today, they live on it. They understand it, 
they go out there, they do their research and that's how they 
find the information. The older horses like myself, it was a 
little bit more difficult for me to get an understanding of 
contributing. But when I did have that HR person sit down with 
me and said, start out with the 1 percent growth each year, 
every time you get a promotion, every time you get a change in 
pay associated with the way you are doing business. If you get 
flight pay increases, put a portion of that into your TSP 
account. Save for yourself, save for your future. That's how we 
did the business, but you had to have that one-on-one.
    Mr. Lynch. I appreciate that, and I think this hearing has 
certainly elicited some of the conflicts here. So while I said 
at the outset I am very happy with the TSP, we need to move 
forward and we are. But I think we have to do so with a certain 
degree of caution as to the interests of the people that we all 
represent, these participants now and in the future.
    But I want to thank you very much for your willingness to 
come before the committee and help us with our work. We have 
benefited greatly by your perspectives and your 
recommendations. I can't guarantee that you won't be asked to 
appear here again, maybe around the time that we are rolling 
this out, so we can keep a closer tab on things and maybe 
respond to some of the issues that you've raised here today.
    But thank you very much for your participation, and you're 
free to go. The hearing is now adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
    [The prepared statements of Hon. Jason Chaffetz, Hon. 
Elijah E. Cummings, and Honl. Gerald E. Connolly, and 
additional information submitted for the hearing record 
follow:]

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