[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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