TSP interfund transfers climb in October

The number of interfund transfers within the government's retirement savings plan rose in October, with federal employees opting to invest in safer offerings, according to new data from the Federal Retirement Thrift Investment Board.

There were 122,878 transfers among the Thrift Savings Plan's six funds last month, up from 104,089 in September. Most of the money was moved from the C and I funds, which are invested in common stocks of large companies on the Standard & Poor's 500 Index and international stocks, respectively, into the stable government securities (G) and the fixed-income bonds (F) funds.

The stock market performed fairly well in October, but there was some volatility and September saw dismal TSP returns. The ongoing debt crisis in Europe also likely affected where federal employees moved their money in October.

November TSP returns looked bleak as well as of Tuesday, according to the board's Chief Investment Officer Tracey Ray. The C, I and S funds are all on track to post negative returns for this month, Ray said during a board meeting Wednesday. The S Fund invests in small and midsize companies and tracks the Dow Jones Wilshire 4500 Index.

On a brighter note, the TSP participation rate for federal employees is strong, currently at 85.4 percent, while participation for military members is 39.3 percent, despite fewer enrollees from the reserves. In September, 16.2 percent of reservists participated in the TSP, but that dropped to 14.5 percent in October.

Renee Wilder, director of research and strategic planning, said the decrease reflected the reductions in force within the military as a result of the drawdown in Iraq. "We could see it decline a bit further, especially as we pull out of Iraq," she said. Wilder also said reservists tend to be younger and have less money in their TSP accounts, which could contribute to the lower rate. In addition, service members do not receive a matching contribution from the government the way that civilians do, which is another key difference, she pointed out.

Automatic enrollment in the TSP for civilian employees has proved successful, Wilder said, and the TSP currently has a 2.7 percent opt out rate, which she called "exceptional." The opt-out rate for traditional 401(k) plans in the private sector is between 4 percent and 5 percent.