[Congressional Record Volume 141, Number 141 (Tuesday, September 12, 1995)]
[Extensions of Remarks]
[Pages E1764-E1765]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


        THE FEDERAL THRIFT SAVINGS PLAN ENHANCEMENT ACT OF 1995

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                       HON. CONSTANCE A. MORELLA

                              of maryland

                    in the house of representatives

                       Tuesday, September 12, 1995
  Mrs. MORELLA. Mr. Speaker, today I am introducing the Federal Thrift 
Savings Plan Enhancement Act of 1995. The bill will authorize the 
addition of a Small Capitalization Stock Index Investment Fund and 
International Stock Index Fund to the investments available under the 
Federal Thrift Savings Plan (TSP). These stock funds will be linked to 
the Wilshire 4500, Wilshire 5000 index minus the 500 stocks held in the 
S&P 500 index, and the Morgan Stanley EAFE Indices, respectively.
  By adding these two funds to the Federal employees' retirement 
investment portfolios, it potentially will increase their investment 
earnings for retirement. The bill would also empower Federal workers to 
take more active and personal responsibility for their retirement. This 
is a theme that the private sector has embraced with much success, and 
its integration into the Federal culture has considerable value.
  The addition of the two funds would cost taxpayers nothing, because 
the contributions to the funds would come from the discretionary income 
of Federal workers. At the same time, it would give Federal workers 
retirement investment options that are increasingly being made 
available to their private sector counterparts.
  In offering this bill, I envision a more flexible and attractive 
investment policy that will provide prudent and tested investments 
suitable for accumulating enough funds for a long and happy retirement. 
If there is one major goal in introducing this bill, it is to increase 
the likelihood of a quality retirement life.
  The current Federal TSP has three investment funds: the Government 
Securities Investment Fund (G Fund); the Common Stock Index Investment 
Fund (C Fund); and the Fixed Income Investment Fund (F Fund). These 
funds are passive investments, tracking a broad index, and do not have 
a negative effect on the budget. By linking the Small Capitalization 
Stock Index Investment Fund with the Common Stock Investment Fund, the 
legislation would open up virtually the entire U.S. Stock Market to the 
TSP. Likewise, by adding the International Stock Index Investment Fund, 
it would allow Federal workers to capitalize on approximately 58 
percent of the world market.
  Over the past decade, capitalizing on these two investment 
opportunities would have increased the earnings of participants. In 
fact, the Wilshire 4500 has outperformed the S&P 500 in 12 out of the 
last 20 years, while generally moving in the same direction as the S&P 
500. At the same time, the EAFE has also outperformed the S&P 500 in 11 
out of the past 20 years. Over these two decades, adding these two 
funds to an equally distributed TSP would have produced the highest 
annual return of 12.8 percent with a 10.4 percent standard deviation.
  The addition of these two funds does not come without risk. These 
funds are more volatile than the C Fund, which currently is the most 
volatile fund in the TSP. However, experts have noted that the right 
amount of diversification can actually negate investment risk. For
 instance, when an EAFE index fund investment is added to a C Fund 
investment, the volatility of the combined investment actually 
decreases.

  The bill also includes a provision that would allow Federal workers 
to increase the amount they can contribute to the TSP, without altering 
the current matching formula. My goal is to provide Federal workers the 
flexibility to increase their contribution levels to the maximum 
allowed by IRS laws. The Federal workers in my district as well as 
across the country overwhelmingly support this provision. Many see it 
as an opportunity to offset potential changes to the retirement system. 
Support for the increase was also echoed by Vincent Sombrotto, 
president of the National Association of Letter Carriers [NALC] at a 
hearing held last year. Mr. Sombrotto stated that ``Letter carriers 
throughout the Nation understand the great importance of saving for 
their retirement. In fact, they would like to do more to ensure their 
financial security.'' He further stated that delegates at the NALC 
Biennial Convention supported legislation to allow both FERS and CSRS 
employees to contribute more to the Federal TSP.
  There is also another benefit to increasing the contribution limit. 
By increasing the money going into funds, this could increase the 
available investment capital for the Nation's economy. If this becomes 
the case, this is clearly a ``win-win'' situation for the country and 
Federal workers.
  There, however, is the potential that this provision could impact the 
revenue base since employee contributions are tax deferred. I 

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have asked the Joint Committee on Taxation to perform an analysis 
outlining any potential negative impact to the revenue base. I am 
committed to an increase, but not at the expense of the revenue base. 
Therefore, the actual amount of the percentage increase will depend 
upon the Joint Tax Committee's analysis. This will allow the cosponsors 
of the bill to support it with a clear fiscal conscience.
  As I introduce this bill, I hope that we can help others view their 
retirement years as a new beginning by providing the framework to get 
there.


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