TSP posts positive returns as interfund transfers drop
Board discusses proposed reforms to the plan, including automatic enrollment and more fund offerings.
The Thrift Savings Plan's equity funds showed positive returns in April for the first time since October 2007, reported Chief Investment Officer Tracey Ray on Monday. The Federal Retirement Thrift Investment Board also discussed congressional proposals to update the plan at its monthly meeting.
"Those people who stuck it out [and did not made withdrawals], they probably have come back to pretty much flat," FRTIB Chairman Andrew Saul said, suggesting that positive returns could begin to compensate for the market's decline earlier in the year.
In April, the G Fund rose 0.24 percent, the C Fund increased 4.94 percent, the S Fund climbed 5.30 percent, and the I Fund rose 5.55 percent. The F Fund fell 0.16 percent.
Trading in all funds dropped in March and April when the TSP sent out warning letters to frequent traders and finalized its new interfund restrictions, limiting participants to two transfers per month with unlimited transfers into the G Fund. Those limits took effect on May 1.
TSP Executive Director Gregory Long acknowledged that the transition to the new rules was not without dissent, but that it was proceeding well.
"There was some flack from the people who gave us flack before, but no new flack," he said.
TSP participation by members of the active-duty armed forces, which the board has made a priority, rose from 35.8 percent in March to 36.1 percent in April. Overall participation rose 0.1 percent.
In addition to discussing returns and trading, the board made its first foray into draft legislation released by House Oversight and Government Reform Committee Chairman Henry Waxman, D-Calif., ranking member Tom Davis, R-Va., and Federal Workforce Subcommittee Chairman Danny K. Davis, D-Ill.
"We regard the TSP as the premier retirement savings program in the nation," the lawmakers wrote in a May 16 letter. "But we also recognize that the law creating the TSP was enacted over 20 years ago and has been only infrequently updated."
That bill contains proposals, backed by the board, to automatically enroll new federal employees in the TSP when they start federal service, and to default their investments to the L Fund.
"Saving is so important," Saul said. "You can opt out; there are no handcuffs, but it's so important to force the issue."
Less clear is how the board will respond to proposals that it create a Roth IRA option for TSP participants, which Long said is popular among members of the military, and would allow participants to pay an extra fee to enroll in specialized funds like those that exclude investments in Sudan, focus on socially responsible investing or concentrate on certain types of companies.
Tom Trabucco, TSP director of external relations, said the board is reviewing the viability of a Roth option, and research should be completed by mid-2009.
But Saul said ongoing upgrades to the TSP's electronic infrastructure effectively foreclosed immediate implementation of a Roth IRA.
"In the next 12 to 18 months, we couldn't put it in even if we wanted to, because it's a whole different bookkeeping and accounting system," he said.
As part of those upgrades, the TSP is conducting a survey to learn more about how fund participants view its Web site.
Long said he expected calls for specialized funds to continue. "We are going to get requests forever from people who want their particular fund to be in the TSP," he said.