KOHL RELEASES OPM REPORT ON RACIAL AND GENDER DISPARITIES IN FEDERAL TSP PARTICIPATION
WASHINGTON - Today U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) released a study conducted at his request by the U.S. Office of Personnel Management (OPM) examining rates of participation in the Federal Thrift Savings Plan (TSP) by ethnicity and gender. OPM found that minorities are less likely to participate in TSP (82.5 percent of minorities versus 87.8 percent of non-minorities). When minorities do participate, they contribute roughly 25 percent less than their non-minority counterparts. Women are slightly more likely to participate in TSP (86.4 percent versus 85.8 percent of men), but contribute less money and tend to invest more conservatively. The mean balance of a female's account is 22 percent lower than the mean male balance ($62,527 versus $79,819).
"Retirement security is a vital issue for all Americans, no matter their race or gender," said Kohl. "Expanding pension coverage through products like the auto-IRA, auto-enrollment for 401(k) plans, and adequate fee disclosure have the potential to close some of these gaps so every American can retire security after a lifetime of work, and we are actively exploring ways make sure they can be implemented effectively and broadly."
Last October, Kohl released a report by the U.S. Government Accountability Office (GAO) examining the effect automatic enrollment has on 401(k) participation and retirement savings. GAO found that automatic enrollment policies, both for 401(k) plans and IRAs, appear to increase participation significantly. GAO raised questions about how such a proposal could be implemented to effectively help those workers who are most likely to need assistance in saving for a secure retirement. TSP plans to enact automatic enrollment this August.
A similar study of private sector data released last July by the Ariel Education Initiative and Hewitt Associates found that even when adjusted for other factors like salary, age, and job tenure, African Americans are seven percent less likely to participate in 401(k) plans than non-minority employees, and Hispanics are six percent less likely.
"Ariel has been working to close the wealth gap for over many years. We are grateful our study drew the attention of the federal government. We want to thank Senator Kohl for his ongoing leadership and look forward to working with him and OPM to develop new strategies for eliminating these disparities and strengthening retirement security for all Americans," said Mellody Hobson, President of Ariel Investments.
Kohl has been active on the issue of strengthening 401(k) retirement savings. Along with Senate HELP Committee Chairman Tom Harkin (D-IA), Kohl introduced the Defined Contribution Fee Disclosure Act to require 401(k) plan providers to disclose all fees so that workers saving for retirement can make a fully informed decision about which plan is best for them.
In their report on the private sector, Ariel/Hewitt also found that minorities are more likely to take out 401(k) loans and hardship withdrawals. The Aging Committee has found 401(k) loans and withdrawals to have significant detrimental effects on retirement savings. In early June, Kohl will introduce the SEAL 401(k) Pensions Act to reduce 401(k) such leakage. In addition, Kohl is working to strengthen one of the most popular default options, target date funds, for all investors. He recently announced that he is crafting legislation to require target date fund managers to take on a fiduciary responsibility in order for such funds to be eligible for the designation of Qualified Default Investment Alternative (QDIA).
On June 16, Senator Kohl will hold an Aging Committee hearing on turning retirement savings into lifetime income.
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A copy of OPM's study can be found here:
http://www.aging.senate.gov/download/opm-tsp-report
