TSP board proposes investment change

Money invested in the Thrift Savings Plan would be protected from the stock market's ups and downs after TSP participants die, under a new proposal announced Thursday by administrators of the government's 401(k)-style investment program.

The proposal would automatically transfer the TSP participant's entire account into the super-safe G Fund, which invests in stable government securities, upon written notification of the participant's death. Under current death benefit regulations, the Federal Retirement Thrift Investment Board maintains the account as it was invested when the participant died, spread among the G Fund, the C Fund, which invests in common stocks, and the F Fund, which invests in fixed-income bonds. So if a participant had invested 70 percent of their TSP contributions in the C Fund and 30 percent in the G Fund, under current regulations the participant's money would remain in those funds. Under the proposed change, all the money would be shifted into the G Fund.

According to the TSP board, which administers the TSP, the new proposal would protect the TSP participant's survivors. Investments in the TSP's C and F funds are subject to market risk, even after a participant's death. Money in the G Fund, however, is invested in short-term government securities and do not fluctuate in value.

TSP beneficiaries are not granted the right to change TSP investments of a deceased participant, even under current rules. Under the new proposal, the value of a deceased participant's TSP account would be preserved until it could be paid out to the surviving beneficiary.

The proposed change was announced in Thursday's Federal Register. The TSP board is accepting comments through April 12.