Equity Action Plan in Advancing Financial Security
Barrier to Equitable Outcome(s)
OPM’s Retirement Services (RS) is responsible for the Government-wide administration of retirement benefits and services for roughly 2.7 million annuitants, survivors, and family members. The Thrift Savings Plan Open Elections Act of 2004 (Public Law 108-469) and 5 U.S.C. 8350 gave OPM the responsibility to work with agency benefits officers across government to develop and implement a retirement financial literacy and education strategy. OPM’s effort is targeted at providing tools to benefits officers across government to deliver timely and relevant information to Federal employees to help them meet their retirement goals.
As discussed in Executive Order 13985, financial education and wealth accumulation are especially important areas of focus, particularly for underserved communities who experience disparities in wealth accumulation. President Biden’s statement issued on June 1st, 2021, commemorating the 100th anniversary of the Tulsa Race Massacre, highlights this point: “Because disparities in wealth compound like an interest rate, the disinvestment in Black families in Tulsa and across the country throughout our history is still felt sharply today. The median Black American family has thirteen cents for every one dollar in wealth held by White families.”
All new Federal employees have a defined contribution plan in the form of the Thrift Savings Plan and a defined benefit plan in the form of the Federal Employees Retirement System (FERS). This contrasts with private industry where 52% of workers have only a defined contribution plan, 3% have only a defined benefit plan, and 12% have both. While most agencies devote significant resources to retirement readiness interventions as Federal employees approach retirement (typically 5 years before retirement), the resources for early and midcareer financial planning are often limited or nonexistent. These gaps in financial education programs are problematic because wealth accumulation is a career-long effort, and key decisions made early in a Federal career compound over a lifetime, either positively or negatively. Additionally, much of the existing agency financial education materials focus on a single benefit program rather than providing an integrated view of programs available to Federal employees.
The Federal government has a strong legacy of creating pathways to the middle class for communities of color, particularly Black Americans, when other economic opportunities were unavailable to them. Moreover, as the largest employer in the country, the Federal government currently employs a diverse range of workers. Coupled with OPM’s efforts to provide every Federal worker with pay of a minimum of $15 per hour, OPM is poised to position the Federal government as an employer of choice, not only because of its longstanding and robust retirement program, but going forward, its appreciation of the current wealth gaps and the need for comprehensive financial education among its diverse workforce.
Finally, OPM’s engagement with Federal employee focus groups yielded insights about barriers to achieving retirement readiness and fit into two main categories of findings. First, many Federal employees shared that they do not have a good understanding of what their Federal benefits include, how benefits programs integrate to provide opportunities for wealth accumulation, or how the benefits they will receive are calculated. Second, while most agencies offer retirement readiness courses close to an employee’s retirement date, employees explained that very little information is available for early and midcareer employees.
Action and Intended Impact on Barrier
OPM’s effort is targeted at providing tools to benefits officers across government to deliver timely, accessible, and relevant information to Federal employees to advance financial security. This effort includes conducting an overall assessment, targeted analyses, and potential interventions aimed at promoting financial outcomes through three key areas. First, OPM will continue to examine how key decisions in early and midcareer can improve the trajectory of wealth building. OPM will continue to partner with agencies across government to build upon previously conducted literature reviews regarding the most effective strategies for the timing, content, and delivery mechanisms to promote financial security. The effort will build on a wide range of evidence-based research findings to identify interventions that show promising results.
Second, OPM will work with benefits officers across government to examine existing agency financial education plans and specific government financial educational programs. Since mission, size, resources, geographic distribution, and Federal employee composition vary greatly between agencies, it is expected that training needs will also vary. In considering potential programs, a wide range of agency needs, including the needs of underserved communities will be considered. Additionally, some agencies face significant resource constraints in their ability to provide retirement readiness tools, so programs that are scalable and low cost are a particular focus of the effort. OPM will also continue to upskill benefits officers in financial education best practices during the annual benefits officer training.
Finally, OPM sees an opportunity to identify effective financial education programs currently in use at some agencies and make them more widely available across government. OPM will identify programs that show the largest effect on key decisions for wealth building and share them with benefits officers. Because staff in agency benefit offices do not typically have detailed training in financial education, providing a set of existing tools that integrate benefit programs at key early and midcareer stages across government are a timely and cost-effective way to advance financial security. Our approach offers a way to build on existing capabilities and offer evidence-based solutions for agency benefits officers across government.
In the next two to four years, OPM will explore potential tools to quantify gaps in financial literacy and measure knowledge about existing benefits programs (e.g., TSP, FERS/CSRS annuities, Social Security benefits, and additional initiatives like student loan repayment programs). OPM will then use that information to identify programs that can help address gaps in wealth building decisions. OPM wishes to begin an internal agency pilot test using some of the interventions which have shown to be useful and examine whether these lead to behavioral changes. OPM will begin tracking the following measures:
- Number of agency educational programs reviewed
- Number of agencies that include financial education programs for early and midcareer employees in their financial education plans
- Number of agencies that include targeted financial education programs for underserved communities
- Percentage of OPM employees who make retirement savings changes, such as enrollment rate, contribution rate, and/or fund elections (measure will be selected according to largest identified needs and pilot testing)
In the five to eight-year timeframe, OPM will collaborate with other agencies and leverage government-wide surveys to measure:
- Percentage of employees who report having early and midcareer access to financial education
- Percentage of employees who report understanding how TSP, CSRS/FERS, Social Security, and private assets integrate to build wealth and promote a secure retirement
Once the research is complete and effective programs have been identified, OPM will produce a final report summarizing governmental efforts. Additionally, OPM will provide research-based recommendations relevant to reducing any barriers faced by employees, including underserved communities. Furthermore, OPM will issue a Benefits Administration Letter summarizing tools available for agency benefits officers to use to address early and midcareer financial security. The efforts described in this submission are aligned to the OPM FY 2022-2026 Learning Agenda, the FY 2023 Annual Evaluation Plan and FY 2023 Congressional Budget Justification and Annual Performance Plan.
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