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:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Federal IT Applications: Assessing Government's Core Drivers

    In order to better understand the current state of external and internal-facing agency workplace applications, Government Business Council (GBC) and Riverbed undertook an in-depth research study of federal employees. Overall, survey findings indicate that federal IT applications still face a gamut of challenges with regard to quality, reliability, and performance management.

    Download
  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

    Download
  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

    Download
  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

    Download
  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security

    Download

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