Would a TSP-for-All Constitute Government Overreach?

This story has been updated. 

Policy experts have given mixed reviews to a proposal to open the Thrift Savings Plan to all Americans, with some conservative groups fearing an increased role for the federal government.

Sen. Marco Rubio, R-Fla., unveiled his plan last week as part of a larger retirement reform proposal. Rubio called it unfair that federal employees and lawmakers have access to the TSP -- a defined-contribution retirement savings account -- but the general public does not. He pitched offering the TSP to all American workers who lack access to a similar, employer-sponsored plan.

Some of Rubio’s fellow conservatives voiced criticism of the Florida Senator’s plan, however. The Heritage Foundation wrote a critique of the proposal, saying it would result in a “huge government-directed windfall” for BlackRock, the investment company with the largest contract with TSP.

The number of workers without employer-sponsored plans is estimated at 78 million individuals.  Heritage noted that if just one in 10 of those eligible signed up for the TSP, the plan would triple in size.

Romina Boccia, a fellow at Heritage, wrote the TSP expansion would “crowd out private-sector retirement accounts.” Both Boccia and Jason Richwine, an economist who criticized Rubio’s proposal in the conservative-leaning National Review Online, said the plan would open up TSP to diverting funds toward “politically motivated goals.” The authors imagined TSP administrators divesting from companies that are not environmentally friendly or oppose same-sex marriage.

“Given the amount of money the government would oversee, that pressure could be a backdoor way for the government to regulate business practices and even political speech,” Richwine wrote.

He also said the government securities (G) fund, which invests in U.S. Treasury bonds, already provides an exclusive benefit to the federal workforce, and its expansion would be prohibitively expensive.

Not all the reviews were negative, however. The American Enterprise Institute, another right-leaning think tank, defended Rubio’s policy offering, arguing the participation and contribution rates would likely be low.  Andrew Biggs, a resident scholar at AEI and former official at the Social Security Administration, estimated only about $5.2 billion in new annual contributions to the TSP under Rubio’s proposal. TSP currently manages roughly $391 billion in assets.

The Center for American Progress, a liberal think tank, proposed opening up the TSP for all Americans in 2012. That proposal called for all employers -- except those that provide a defined-benefit pension -- to offer either a collective defined-contribution plan or access to the TSP. 

"I applaud Senator Rubio for taking a really important step," David Madland, the author of CAP's proposal, told Government Executive. He added the plan would provide individuals with a better way to save their money without adding costs to the government. "I don't see how conservatives could object."

In his most recent State of the Union address, President Obama proposed MyRA, which would give all Americans access to the G Fund.

The TSP's overseer, the Federal Retirement Thrift Investment Board, raised serious concerns with Rubio’s proposal. An official last week told Government Executive the agency was reluctant to dilute its focus on its current participants and the new responsibilities would “require a completely different set of operational capabilities.”