SENATOR COLLINS’ PROPOSAL TO GIVE FEDERAL EMPLOYEES INCREASED ACCESS TO RETIREMENT SAVINGS RECEIVES FINAL CONGRESSIONAL APPROVAL

Washington, DC – The U.S. Senate today approved a proposal written by Senate Governmental Affairs Committee Chairman Susan Collins (R-ME) that gives federal employees better access to and flexibility in using the federal retirement saving program, called the Thrift Savings Plan (TSP). The legislation (HR 4324), sponsored by House Government Reform Committee Chairman Tom Davis (R-VA), is based on original legislation written by Senator Collins that was approved by the Senate in July (S 2479). The legislation is now sent to the President for his approval.

"This is a great achievement for federal employees. Our legislation gives federal employees the same access and flexibility to their retirement savings plan that most workers have in the private sector. It provides federal employees with maximum flexibility to tailor their retirement investment decisions by eliminating current restrictions on when employee contributions to the Thrift Savings Plan can begin or be modified," said Senator Collins. "Our legislation will make the federal retirement saving plan much more user-friendly. Our hope is that this change attracts more federal employees to save for their future using the TSP."

Under current law, newly hired federal workers can sign up to contribute to the TSP during the first 60-days of their employment. If an employee chooses not to join the plan at that time, they then have to wait for restricted periods during the calendar year, known as "open seasons," during which they are allowed to join. In addition, employees who are already enrolled in the TSP can only make changes to their contribution plan during these open seasons.

"These restrictions can unfairly penalize employees and discourage their participation. Our legislation lifts those restrictions to allow employees to initiate, modify, or terminate contributions to the TSP at any time, provided the amount does not exceed existing limits for contributions," added Senator Collins.

Senator Collins has noted that open seasons were practical in the formative years of the TSP, when the program lacked the administrative capability to quickly enroll participants and to implement investment elections on a real-time basis. However, with the introduction of an automatic record-keeping system, the program has outgrown its existing framework.

The Chairman of the Federal Retirement Thrift Investment Board has supported the elimination of the open season requirement because it would expand participant access and simplify the administration of the TSP. The Chairman of the Employee Thrift Advisory Council has predicted that lifting the open season restrictions would reach 13 percent of employees in the Federal Employees Retirement System who currently do not make contributions to the TSP.

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