[Congressional Record Volume 158, Number 68 (Monday, May 14, 2012)]
[Senate]
[Pages S3131-S3132]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. AKAKA:
S. 3175. A bill to amend subchapter III of chapter 84 of title 5,
United States Code, to authorize certain employees to be automatically
enrolled to increase contributions to Thrift Savings Plan accounts; to
the Committee on Homeland Security and Governmental Affairs.
Mr. AKAKA. Mr. President, I rise today to introduce the Save More
Tomorrow Act of 2012. This act seeks to make a modest, commonsense
modification to the Thrift Savings Plan, or TSP, which is the tax-
deferred, defined contribution plan for Federal employees, similar to
private sector 401(k) plans.
The Save More Tomorrow Act would build on the Thrift Savings Plan
Enhancement Act of 2009, which was enacted with support from large,
bipartisan majorities in Congress. Under the Thrift Savings Plan
Enhancement Act, new Federal employees are automatically enrolled in
the TSP unless they opt out, with a default employee contribution rate
of 3 percent of basic pay. This legislation would adjust the TSP's
automatic enrollment mechanism to allow it to automatically increase
employee contributions, unless the employee chooses a different
contribution rate. To accomplish this, the bill authorizes the Federal
Retirement Thrift Investment Board, the agency that administers the
TSP, to pair the current auto enrollment at 3 percent with automatic
escalation of 1 percent per year, for at least 2 consecutive years
following the first year of enrollment. This promotes a goal of the
Federal Employees' Retirement System Act of 1986, often referred to as
FERSA, which was designed to encourage Federal employees to save at
least 5 percent of their pay in the TSP.
This ``three plus one plus one'' model closely mirrors the model
Congress
[[Page S3132]]
prescribed for the private sector in the Pension Protection Act of
2006, which Mr. Boehner of Ohio introduced, the House and Senate passed
with significant bipartisan support, and President George W. Bush
signed into law. In enacting the Pension Protection Act, Congress
endorsed pairing automatic enrollment with automatic escalation, by
incentivizing companies to automatically enroll employees in 401(k)
plans at no less than a 3 percent savings rate, and automatically
escalate that rate by at least 1 percent for at least 3 years.
This act is informed by rigorous oversight I have conducted as
Chairman of the Subcommittee on Oversight of Government Management, the
Federal Workforce, and the District of Columbia. For example, at a
recent Subcommittee hearing, Dr. Brigitte Madrian, a Harvard Kennedy
School professor and leading expert on employer-sponsored retirement
savings plans, stated, ``the evidence from the private sector is that
automatic escalation is, in fact, extremely effective at increasing
employee savings rates. And you asked specifically is this [automatic
escalation] something that should be considered for the Thrift Savings
Plan, and I would say absolutely.''
To preempt any possible misconceptions or misunderstandings that may
arise regarding this act, I want to be clear from the outset about
which employees the Save More Tomorrow Act applies to, and the
voluntary nature of the bill. Since this act builds on the statutory
framework established by the Thrift Savings Enhancement Act, it only
applies to newly hired Federal employees who are eligible to
participate in the TSP's automatic enrollment feature. Additionally,
just like the TSP's auto enrollment feature, auto escalation authorized
by this act would be voluntary, and allow participants to terminate
default contributions, or change contribution rates, at any time.
This bill has a limited, targeted scope. It would increase the
savings only of the small percentage of new employees who enroll in the
TSP, but do not raise their contribution rate enough to reach the goal
Congress established with FERSA of having most Federal employees
contributing at least 5 percent of basic pay. Under the Thrift Savings
Plan Enhancement Act, an impressive 97.2 percent of new Federal
employees are enrolling in the TSP--82,632 Federal employees have been
automatically enrolled in the TSP since the practice began in August
2010. Most of those employees increase their contributions far above
the default rate of 3 percent. These enrollees boast an average TSP
savings rate of 12.1 percent. Currently, only about 9 percent of
employees in the Federal Employee Retirement System enrolled in the TSP
contribute less than 5 percent.
Of course, one must not confuse this act's limited scope with the
potential benefits. From the most recent survey of TSP participants, we
know that just like in the private sector, low-income workers who can
least afford to forgo matching contributions are the most likely to do
so. Lower-income Federal employees are more than twice as likely as
higher-income employees to cite automatic enrollment as the reason they
are contributing to the TSP. Many employees who contribute less than 5
percent are not even aware of the benefits of increasing the amount
they save--18 percent of this group reported they did not contribute 5
percent because they were unaware agencies matched contributions
dollar-for-dollar on the first 3 percent of basic pay, and 50 cents on
the dollar for the next 2 percent.
Today's Federal workers must plan carefully to ensure their
retirement security. Fortunately, the vast majority of the Federal
employees are responsibly saving for retirement, exhibiting average
savings rates that are far greater than the private sector. However, I
am concerned that the most financially vulnerable Federal employees,
individuals earning less than $25,000 a year, are saving at a lower
rate that will hinder their ability to retire with dignity. We should
build on the success of the Thrift Savings Plan Enhancement Act by
making it as easy as possible for employees to increase their
contributions.
The Save More Tomorrow Act is a limited, yet effective legislative
response to do just this. Informed by rigorous data from real world
experiences in the private sector, this act represents the best in
serious, evidence-based policymaking. The modest authorities provided
by the Save More Tomorrow Act will enhance the Federal Retirement
Thrift Investment Board's ability to meet FERSA's goal of encouraging
TSP contributions of 5 percent of pay. I strongly urge my colleagues to
support this important legislation.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 3175
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Save More Tomorrow Act of
2012''.
SEC. 2. AUTOMATIC ESCALATIONS.
Section 8432(b)(2) of title 5, United States Code, is
amended--
(1) in subparagraph (A), by striking ``enrolled to make''
and all that follows and inserting the following: ``enrolled
to--
``(i) make contributions under subsection (a) at the
default percentage of basic pay; and
``(ii) increase the percentage of basic pay contributed
under subsection (a) by the eligible individual by 1 percent
each year beginning in the first year following the year in
which the eligible individual began making contributions
under clause (i) and each year thereafter for not less than 2
years (which the Executive Director shall establish by
regulation).''; and
(2) in subparagraph (C)--
(A) in the matter preceding clause (i), by inserting ``and
have the contributions of the individual automatically
increased'' after ``automatically enrolled'';
(B) in clause (i), by inserting ``(which shall terminate
the automatic increases in the contributions of the employee
under subparagraph (A)(ii))'' after ``automatic enrollment'';
and
(C) in clause (ii), by inserting ``and an automatic
increase in contributions under subparagraph (A)(ii)'' after
``automatic enrollment''.
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