[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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