[Congressional Record Volume 160, Number 109 (Monday, July 14, 2014)]
[House]
[Pages H6162-H6164]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           SMART SAVINGS ACT

  Mr. GOSAR. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 4193) to amend title 5, United States Code, to change the default 
investment fund under the Thrift Savings Plan, and for other purposes, 
as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 4193

       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 ``Smart Savings Act''.

     SEC. 2. THRIFT SAVINGS PLAN DEFAULT INVESTMENT FUND.

       (a) In General.--Section 8438(c)(2) of title 5, United 
     States Code, is amended to read as follows:
       ``(2)(A) Consistent with the requirements of subparagraph 
     (B), if an election has not been made with respect to any 
     sums available for investment in the Thrift Savings Fund, the 
     Executive Director shall invest such sums in an age-
     appropriate target date asset allocation investment fund, as 
     determined by the Executive Director. Such investment fund 
     shall consist of any of the funds described in subsection 
     (b).
       ``(B) If an election has not been made by an eligible 
     member under section 8440e with respect to any sums available 
     for investment in such member's Thrift Savings Fund account, 
     the Executive Director shall invest such sums in the 
     Government Securities Investment Fund.''.
       (b) Acknowledgment of Risk.--Section 8439(d) of title 5, 
     United States Code, is amended--
       (1) by inserting ``(1)'' before ``Each employee''; and
       (2) by adding at the end the following new paragraph:
       ``(2) Prior to enrollment in the Thrift Savings Fund, or as 
     soon as practicable thereafter, an individual who is 
     automatically enrolled pursuant to section 8432(b)(2) shall 
     receive the risk acknowledgment information described under 
     paragraph (1).''.
       (c) Technical and Conforming Amendment.--Section 8472(g)(2) 
     of title 5, United States Code, is amended by striking 
     ``required by section 8438 of this title to be invested in 
     securities of the Government'' and inserting ``under section 
     8438(c)(2)(B)''.
       (d) Guidance.--Not later than 9 months after the date of 
     enactment of this Act, the Executive Director (as that term 
     is defined under section 8401(13) of title 5, United States 
     Code) shall develop and issue guidance implementing the 
     requirements of this Act.
       (e) Effective Date and Application.--The amendments made by 
     subsections (a) and (b) shall--
       (1) take effect on the date that the Executive Director 
     issues guidance under subsection (d); and
       (2) apply to individuals enrolled in the Thrift Savings 
     Plan on or after such date.

     SEC. 3. CLARIFICATION OF FIDUCIARY PROTECTIONS.

        Section 8477(e)(1)(C)(ii) of title 5, United States Code, 
     is amended--
       (1) in subclause (II)--
       (A) by inserting ``or beneficiary'' after ``participant'';
       (B) by inserting ``or option'' after ``fund''; and
       (2) in subclause (III)--
       (A) by inserting ``or beneficiary'' after ``participant''; 
     and
       (B) by inserting ``or beneficiaries' '' after 
     ``participants' ''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Arizona (Mr. Gosar) and the gentleman from Maryland (Mr. Cummings) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Arizona.


                             General Leave

  Mr. GOSAR. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on the bill under consideration.

[[Page H6163]]

  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Arizona?
  There was no objection.
  Mr. GOSAR. Mr. Speaker, I yield myself such time as I may consume.
  The Smart Savings Act, H.R. 4193, would change the default investment 
fund for Thrift Savings Plan, or TSP, participants from the G Fund to 
an age-appropriate asset allocation fund consistent with a 
recommendation from the TSP governing board. The change would help 
ensure TSP participants are better prepared for retirement by investing 
their contributions in a fund designed to yield higher returns over the 
course of their career.
  Currently, new TSP participants are defaulted into the Government 
Securities Investment Fund, or the G Fund, and remain invested there 
until they can make an election reallocating their account balance into 
one or more of the other funding options.
  The G Fund comes with some risk. The TSP warns G Fund investors that 
their account may not grow enough to offset the reduction in purchasing 
power that results from inflation.
  The TSP's asset allocation funds are a mix of the TSP's offerings 
designed to help yield higher returns while decreasing risk as 
individual participants near retirement. While the funds expose 
participants to market risk, they address such risk in their design.
  In making its legislative recommendation to Congress, the TSP found 
that, had the asset allocation funds been the default investment option 
since the beginning of the automatic enrollment in 2010, participants 
would have achieved greater returns.
  Participants who do not want to assume the market risk associated 
with the L Fund will, of course, maintain their ability to determine 
their own allocation. That can include, for instance, transferring 
their entire balance to the G Fund if that is their desire.
  I appreciate the bipartisan support of Representatives Cummings, 
Woodall, Lynch, Farenthold, Connolly, and Delegate Norton, and urge 
support for this bill.
  I reserve the balance of my time.
  Mr. CUMMINGS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, as an original cosponsor of this bill, I want to thank 
Chairman Issa and Congressmen Farenthold and Lynch for working with me 
on this bipartisan legislation.
  The Smart Savings Act would amend current law to change the Thrift 
Savings Plan default investment option from the Government Securities 
Investment Fund, or the G Fund, to the Lifecycle Fund, or L Fund. This 
is a commonsense change that would help our Federal civilian employees 
save more effectively for their retirement.
  The Federal Retirement Thrift Investment Board, which manages the 
TSP, has indicated that many TSP participants are not actively managing 
their accounts and therefore not taking full advantage of their 
investment options.
  Thrift Board data shows that 33 percent of participants who were 
automatically enrolled in TSP accounts when they were hired have not 
changed their investment allocations and remain totally invested in the 
G Fund. Many of these participants are young employees who would 
benefit most from long-term investments in a diversified portfolio such 
as the L Fund.
  Although there is little to no risk in investing in the G Fund, over 
the long term, the return on investment is only about half of the L 
Fund. It does not make sense to have our Federal employees miss out on 
the potentially higher returns that the L Fund may provide over the 
long term.
  There is precedent for this in the private sector. Surveys show that 
nearly 80 percent of private employers use lifecycle funds as the 
default investment option for the 401(k) plans offered to their 
employees.
  In implementing this legislation, it would be important for the 
Thrift Board to thoroughly explain to TSP participants that the L Fund 
is subject to market fluctuations. I understand that there may be some 
workers who may be concerned about the market risks of the L Fund. This 
bill would preserve the ability of all employees to change their 
allocations and transfer their contributions to the G Fund if they so 
desired.
  I urge my colleagues on both sides of the aisle to join me in 
supporting this bipartisan legislation.
  I want to again thank Chairman Issa and all the members of our 
committee for making this happen, and I reserve the balance of my time.

                              {time}  1730

  Mr. GOSAR. Mr. Speaker, I yield such time as he may consume to the 
gentleman from California, Chairman Issa, my distinguished colleague 
and the chairman of the full Committee of Oversight and Government 
Reform.
  Mr. ISSA. Thank you, Chairman.
  Again, thank you, Ranking Member Cummings.
  Mr. Speaker, we are the board of directors for the Government of the 
United States. Our committee oversees the equivalent of an IRA or a 
401(k) in the private sector, known as the TSP. It sounds like a lot of 
initials, perhaps, to people who are hearing this, or it is even, in 
some cases, confusing to the Federal workforce, but it is really quite 
simple.
  We have through oversight discovered with the Thrift Investment Board 
that, in fact, we have done a disservice to the Federal workers by 
putting them into an absolutely, positively safe investment that does 
not keep up with inflation. Effectively, the dollars they contribute, 
and matching dollars from the government as an employer, are shrinking 
every year in constant dollars. Their investments are, in fact, smaller 
if they stay in that fund.
  Now, near the end of people's careers--in those last couple of 
years--they may want to lock in with absolute certainty the size of 
their retirement funds to use in some way after they leave government, 
but in the first days, it is clear that, in the long run, the only way 
for an investment to grow greater than inflation is to make the kinds 
of investments that are possible in the other offerings under TSP, 
which, again, is the equivalent of a 401(k) in the private sector.
  This recognition was well thought out by the Board, was well 
researched, and brought to our committee. It is one of those simple 
things that should have been done sooner, so I appreciate that the 
committee marked it up quickly and that we are bringing it to the floor 
only a short time later. I hope the Senate will hold it at the desk and 
will quickly allow the President to make it law because, once it is 
law, Federal workers will, for the first time, have a default that 
keeps up with or exceeds inflation.
  The decision to make it quick is not because we are in a hurry. It is 
because, every day, Federal workers, by default and through no fault of 
their own, unwittingly, are finding themselves in inappropriate savings 
plans in their 401(k)s, known in government as the TSP. I know it is 
always one of those things where people say: Why are you in a hurry? In 
this case, we are in a hurry because we realize we should have gotten 
it right sooner, and we certainly are glad that we got it done now. On 
behalf of the committee that oversees the Federal workforce, we hope 
that they will appreciate that they have, if you will, a bit of an 
apology that we didn't act on this even quicker.
  It is important to make sure that the Federal workforce has a good 
pay and benefits package, and in this case, they have a good retirement 
package through TSP that was underperforming for many of our Federal 
workforce. I believe, today, the default will make it perform better 
while taking away none of their inherent choices, including if they 
want to remain in the G Fund.
  Mr. CUMMINGS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Massachusetts (Mr. Lynch), a distinguished member of our 
committee who has worked very hard on these issues and who has been a 
strong advocate for our Federal employees.
  Mr. LYNCH. I thank the gentleman from Maryland for yielding and for 
his kind words.
  Mr. Speaker, as ranking member of the Federal Workforce Subcommittee, 
I rise in strong support of H.R. 4193, the Smart Savings Act.
  This legislation, as has been previously described, would change the 
default investment option for the Thrift Savings Plan participants from 
the G Fund to the Lifecycle Fund, or L Fund. The L Fund uses age-
appropriate investment allocations, which result in

[[Page H6164]]

the higher returns that have been discussed here earlier.
  First, I would like to thank my fellow cosponsors--the gentleman from 
California (Mr. Issa), Ranking Member Cummings from Maryland, 
Congressman Farenthold from Texas, Congressman Connolly from Virginia, 
and Congressman Woodall from Georgia--for working together on this 
bipartisan bill.
  The Thrift Savings Plan is an important component of Federal workers' 
retirement assets. Given the negative impact of pay freezes, furloughs, 
and other challenges to the pay and benefits of our Federal workforce 
over the last few years, I feel it is appropriate for Congress to 
provide investment options that will help Federal employees maximize 
their retirement contributions and savings. Changing the default 
investment option to the L Fund makes a lot of sense because the L 
Funds have substantially outperformed the G Fund over the last several 
years. However, the bill would also allow employees who are risk averse 
the ability to opt out and change their investment options.
  The House passed a substantially similar bill in the 110th Congress, 
but it was never enacted. This time around, I am hoping that this 
commonsense proposal will become law as a substantially similar bill in 
the Senate was recently approved in committee. H.R. 4193 is supported 
by many stakeholders, including the Federal Retirement Thrift 
Investment Board, the Employees Thrift Advisory Council, and various 
employee organizations.
  This legislation provides the dedicated men and women of our Federal 
workforce a reasonable option that, I believe, would help them more 
effectively provide for their own retirements. I urge my colleagues to 
join all of the cosponsors in supporting H.R. 4193.
  Mr. CUMMINGS. Mr. Speaker, with that, I urge all of our Members to 
vote in favor of this very important legislation, and I yield back the 
balance of my time.
  Mr. GOSAR. Mr. Speaker, I urge all Members to join me in support of 
this bill, and I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Arizona (Mr. Gosar) that the House suspend the rules and 
pass the bill, H.R. 4193, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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