Board to revisit more aggressive default funds for TSP participants

The board that oversees the Thrift Savings Plan soon could revisit the idea of making life-cycle funds the default investment for participants who don't specify where they want their money invested.

During a monthly Federal Retirement Thrift Investment Board meeting on Tuesday, Chairman Andrew Saul said he wanted to reopen discussions on shifting the default option from the government securities (G) fund to the L funds, which automatically move investors to less aggressive and more stable portfolios as they near retirement.

The L funds are riskier than the G Fund, but are designed to produce higher returns over the long run. Board members agreed that life-cycle offerings are good tools for participants who might not be financially savvy, and appeared open to re-examining the option of making them the default investment.

But TSP Executive Director Gregory Long reminded the board, "Timing is everything." In 2009, labor unions and federal employee group representatives on the Employee Thrift Advisory Council voiced concern over a bill the House passed in 2008 that would move indecisive investors to the L funds.

During the 2009 meeting, James Sauber, chairman of the advisory council and chief of staff for the National Association of Letter Carriers, said, "If this had been the default for a new young federal employee this year, and they weren't wise enough to be on top of their selection, they could be losing big."

Before the economic downturn, however, the advisory board unanimously supported the legislation.

Shifting the default for TSP participants would affect more federal employees than even before. As of Aug. 1, agencies have automatically enrolled all new civilian employees in the retirement program. Those who do not want to participate must opt out. Long said 51,545 employees have been automatically enrolled in TSP since August. Of those, 27,790 participants, or 53.9 percent, failed to designate how they wanted their money invested, and they were placed in the G Fund.

Saul recommended the board set up a joint meeting with the Employee Thrift Advisory Council in early 2011 to further explore the possible shift. "We've always brought the unions in," he said.

Also during Tuesday's meeting, TSP Chief Investment Officer Tracey Ray gave a brief report on plan's performance and noted a significant drop in L 2010 Fund participation -- from 111,773 at the end of September to 101,527 at the end of October. The L 2010 Fund will close at the end of the calendar year, and any money invested in it will be rolled into the L Income Fund, designed for those who have reached retirement and plan to withdraw savings monthly. Ray said the drop in L 2010 Fund participation could reflect investors' reservations about moving their savings to the L Income Fund.

The board also is planning to distribute in January 2011 an interactive DVD that will provide a thorough introduction to TSP for recently enrolled participants. It is producing separate copies of the DVD for the civilian workforce and military service members. Long said the DVDs should make up for other communications programs cut due to budget constraints.

The board's next meeting will be a teleconference in December.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download
  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care

    Download

When you download a report, your information may be shared with the underwriters of that document.