TSP Envy: Congress Eyes A TSP for More Americans

The Thrift Savings Plan (TSP) has been a success for federal workers. Another bill in Congress would create a similar system for many other Americans.

The American Savings Act has now been introduced in the House. It would create a system for investing closely linked to the Thrift Savings Plan (TSP) for federal employees.

The sponsors of the bill state, “The legislation would create a new American Savings Account (ASA), a personal, tax-advantaged retirement savings plan modeled after the high-quality plan offered to federal workers since 1986, and make it available to every private sector American worker currently without access to an employer-sponsored savings plan such as a 401(k) or 403(b) plan.”

As reported recently, a bill to create a system very much like the TSP has also been introduced in the Senate to provide another method of savings for Americans who work for a company that does not provide a retirement system.

One of the organizations that would be impacted by this legislation would be the organization that oversees the Thrift Savings Plan, the Federal Retirement Thrift Investment Board (FRTIB). The FRTIB has previously taken the position that the TSP should not be opened up to all working Americans. The reason for their opposition to expanding the TSP to a large number of American workers is easy to understand.

Under the House bill, the Executive Director and 3 additional members of the Federal Retirement Thrift Investment Board (FRTIB) would be on the American Savings Account Board of Directors.

Kim Weaver, the Director of the Office of External Affairs for the FRTIB, has previously expressed concern, saying, “We have significant concern about that because it would split our Executive Director and Board’s fiduciary duties between the TSP participants and ASA participants.”

The private sector version of the TSP would potentially be much larger than the TSP for federal employees and therefore require more of the time from the existing board that now oversees the federal Thrift Savings Plan.

Some of the concerns of a new Board of Directors created by the American Savings Act would be the ability to maintain very low expenses while creating a new system that would have to handle millions of small accounts with call centers and a secure website to handle a large amount of traffic. The chances of the existing FRTIB members having to spend most of their time on creating the new organization would seem to be a likely possibility.

As of now, it does not appear that either the House or Senate bills have enough support for passage.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47