TSP automatic enrollment, fund transfer restrictions move forward

Thrift Savings Plan participants aren't likely to see changes in the types of funds they can invest in, despite roiled markets, federal and industry officials said on Monday. But modifications to interfund transfers and enrollment are coming down the pike.

"This has been one of the most turbulent times in the equity and debt market," Andrew Saul, chairman of the Federal Retirement Thrift Investment Board, told representatives of Barclays Global Investors Services. "You are facing fiduciaries who are responsible for a lot of hard-working people who are counting on that money for their retirement."

Blake Grossman, chief executive officer of BGI, said the company would take that turbulence into account in its modeling, but financial fundamentals were still strong, and BGI saw no particular need to make major changes in its investment approach at this time.

"What we've seen in the financial markets has been the most dislocated market we've seen in probably 50 years," Grossman said. "We've seen volatility in one market get spread in a way we hadn't previously, and we're taking that into account in risk modeling."

Grossman noted that TSP investments managed by BGI are protected from some market fluctuations by rules that do not allow the firm to loan TSP securities to companies that potentially could default on them. He would not comment on specific investments, but said TSP members should not worry about their investments becoming tangled up in the problems of financial firms such as Bear Stearns, an investment bank recently bailed out by the Federal Reserve and JPMorgan Chase.

TSP members, however, are likely to see procedural changes in the plan's operation.

Gregory Long, TSP chief executive officer, said the board was close to publishing its final regulation on interfund transfers, which would limit participants to two transfers per month, after which they would be allowed only to shift money into the Government Securities Investment Fund. The comment period for the proposed rule ended April 9.

Long and TSP Director of External Affairs Thomas Trabucco said Congress also is moving forward on a proposal to automatically enroll federal employees in the TSP.

Senate staffers delivered to TSP officials an automatic enrollment bill and Rep. Danny K. Davis, D-Ill., who chairs the House Oversight and Government Reform Federal Workforce Subcommittee, sent the Federal Retirement Thrift Investment Board a letter saying he will hold an April 29 hearing on the issue, Trabucco said.

"The realities are, this is inertia at work," Long said, observing that TSP enrollment would stagnate without automatic enrollment. He pointed out that other retirement plans already are adopting the practice to increase participation rates.