Federal Pensions:

Thrift Savings Plan Has Key Role in Retirement Benefits

HEHS-96-1: Published: Oct 19, 1995. Publicly Released: Nov 20, 1995.

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Pursuant to a congressional request, GAO provided information on the Federal Employee Retirement System (FERS), focusing on: (1) the extent to which employees under FERS voluntarily contribute to the Thrift Savings Plan (TSP); (2) how well TSP educational materials address the importance of employee participation; and (3) whether there should be additional TSP investment options.

GAO found that: (1) as of September 1994, about 76 percent of FERS employees voluntarily contributed an average of 5.7 percent of their salaries to TSP; (2) most of the non-contributing employees were in lower pay grades; (3) lower paid workers contribute less of their salaries to TSP because social security benefits are proportionally higher for lower income workers; (4) these workers may not need to contribute as much to TSP in order to maintain their preretirement standard of living; (5) mid- and high-pay level workers need to contribute at least 5 percent of their salaries over their careers to achieve 60 to 80 percent of preretirement income; (6) although TSP educational materials extensively discuss the plan's financial aspects, they do not explicitly discuss the importance of employee participation in TSP; (7) the TSP Board is seeking legislation that would add two stock fund options to the three investment options it already offers in order to make these options more similar to those available in private-sector plans; and (8) although they carry a higher investment risk, these new investment options could potentially produce higher earnings for plan participants.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: This recommendation was incorporated in section 659 of Public Law 104-208.

    Matter: To help ensure that TSP participants have investment opportunities similar to those available under comparable private-sector plans, Congress should enact legislation adding the two investment options sought by the TSP Board.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In the agency's report comments and December 8, 1995, letter to the Chairman, House Committee on Government Reform and Oversight, the TSP Board strongly objected to this recommendation, saying that such employee education was OPM's responsibility.

    Recommendation: The TSP Board, in collaboration with the Office of Personnel Management, should include in TSP educational materials: (1) an explanation of the pivotal role of TSP in enabling employees under FERS to achieve their retirement income goals; and (2) explicit illustrations of the effects of TSP deferral rates on total FERS benefits.

    Agency Affected: Federal Retirement Thrift Investment Board


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