DigitalPiggyBank

As I’ve written many a time before, GubMints is a big fan of the Thrift Savings Plan (TSP).

Recently the White House Social and Behavioral Sciences Team decided to get ‘Freaky’ with Behavioral Economics and do some experiments to encourage more Active Duty Servicemembers to enroll or re-enroll in the TSP.  They did some interesting experiments to try and ‘move the needle’.

In the first case, due to a change in payroll administration, Servicemembers already participating in Roth TSP (all 139,273 of them) were required to re-enroll in January of 2015 to continue their payroll deduction contributions to Roth TSP. In the first week, service members were sent two different emails, which resulted in a total of 36,352 re-enrollments. One of the messages was 22%  more effective than the other.  This message became the template used to expand the outreach to other service members reminding them to re-enroll in Roth TSP.

In the second case, Servicemembers not enrolled (at all) in TSP were sent one of eight different emails (or a ninth email that was a form letter straight from TSP’s website) by DFAS (the DOD’s payroll system) to alert them about the the TSP benefit they were missing out on.

One of the emails was 67 percent more effective than no email at all, and it resulted in just under 5,000 new enrollments in TSP. Overall, the emails resulted in 13,571 new TSP enrollments in one month (on top of the 920 who enrolled without receiving an email ‘nudge’).

In a third case, DOD prompted service members arriving at a new base to make a ‘Yes’ or ‘No’ choice to participate in TSP as a part of the ‘Welcome Aboard’ briefing when moving to a new duty station.  The ‘Yes/No’ choice prompted 8.7 percent of non-enrolled service members to participate in TSP (compared to 4.3 percent of arriving service members briefed about TSP but not prompted to make the ‘Yes/No’ decision).

These three studies are all a good start, and the efforts by White House and DOD are to be applauded.  But at the start of the study, there were over 800 THOUSAND Servicemembers (out of a total of roughly 1.37M servicemembers) not enrolled in TSP (ouch).   58% non-participation- That’s a huge hill to climb.

I’d recommend that the DOD/White House’s next study determine the WHY’s of low service member TSP participation.   There’s probably more levers to pull to increase Active Duty  Servicemember TSP participation than performing studies in Game Theory.

Low TSP participation among Active Duty must be due to some combination of Credit Card Debt, Student Loans, Unsecured Debt, Secured Debt, low starting wages, and lack of financial literacy.   These could easily push TSP payroll deductions way down the list of financial priorities for Active Duty Personnel.

Note- It shouldn’t take a Presidential committee to fix this–  I’m sure you could pick a random employee or volunteer from a Navy Marine  Corps Relief Society branch and have them identify the reasons Active Servicemembers don’t participate in TSP in order, off the top of their head.

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3 thoughts on “800,000 Active Military Miss Out on TSP Benefit

  1. Awesome post. I just listened to a military financial counselor address a group of Sailors (with a few Soldiers sprinkled in) and I think he may be on to something:
    1) Recruit signs up for TSP amidst signing many other papers
    2) Recruit is automatically put in G fund
    3) Recruit now a junior NCO goes back a few years later – “what is this TSP?” “Why am I paying into it” now that s/he is more savvy
    4) G fund has boring performance compared with pitches from any number of financial planners approaching junior NCO
    5) Junior NCO is suckered into moving out of TSP into some actively managed fund without really understanding other TSP options.

    The move to L funds at enrollment may help with this. What do you think?

    Reply
  2. This is a great post on TSP. Using our natural tendency towards inertia, the US government could make TSP an opt-out (vice opt-in) program, and almost every servicemember would be grateful.

    Thank you very much for this article! We need to bring this issue to the attention of everyone.

    Reply

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