By Tammy Flanagan
September 7, 2007Sometimes people ask me if teaching retirement planning, as I've been doing for 20 years, ever gets boring. My answer is always the same: I love what I do because the people are all different and there is enough ongoing change to keep it very interesting. For example, take the Thrift Savings Plan. The officials who run it constantly are making changes to keep up with new technology, threats to security, lobbying efforts and the needs of the 3.8 million participants who trust the TSP to keep a total of more than $200 billion worth of investments safe and secure.
This week, I thought I'd explain some of the TSP's recently implemented policies and procedures.
The TSP employees who review beneficiary designation forms can be sticklers for details. If you leave out some identifying information regarding designated beneficiaries, you will get a response asking for additional information. If you've erased, altered, or crossed out anything on the form, it will be rejected.
Why are they so tough on you? Because you won't be around if the form ever needs to be used for its intended purposes -- to honor your wishes in the event you die before all savings are spent. The beneficiary form is a legal document that needs to hold up in court in the event it is challenged.
Beginning in 2008, you will receive an annual statement listing your current primary beneficiaries. You have between now and next year to submit a new form or choose to be surprised when the statement appears in the mail. (I don't want to be in your kitchen when that happens!) The form on which to designate a beneficiary is called TSP-3 and it's available here.
Be sure to take care in filling it out. For example, make sure the percentages of funds allocated to each of your beneficiaries adds up to 100 percent. Make a copy of the form for your records and mail the original to:
TSP Service Office
P.O. Box 385021
Birmingham, AL 35238
You also can fax the completed form to 866-817-5023.
The TSP is incorporating a number of changes to be sure your investments are safe from identity thieves:
Update Your Address
Did you know that almost one third of the mail the TSP sends out each month comes back as undeliverable? ? If you're an active employee, be sure you keep your address up to date with your agency. Even though you may receive your earnings and leave statements, W-2s, and even TSP participant statements electronically, the TSP still mails participants notices and important announcements.
When you leave federal service but leave money in your TSP account, make sure to keep your address current. Your payroll office will no longer provide this service. The TSP's change of address form for separated participants, TSP-9, is available here.
When you have left government and are over 70½ years old, you must make a withdrawal election (as well as begin receiving IRS-required minimum distributions) from your TSP account. There are currently close to 700 separated participants who are in jeopardy of having their accounts declared abandoned because they have not done this. Here's a tax notice that explains more.
It's possible that some of the folks who haven't responded to the TSP's efforts to contact them have a very good reason -- they have died and their beneficiaries may not even know that their accounts have funds remaining in them. TSP Book 31: Death Benefits has more information on this subject.
Next year, employees who have their payroll serviced by the National Finance Center will experience 27 pay dates. For FERS participants to make sure they get the full advantage of matching contributions, you must have at least 5 percent of your pay withheld for your TSP account each pay date. Some employees will meet the IRS elective deferral limit ($15,500 for 2007) before the end of the year and miss out on hundreds of dollars of free agency matching contributions. Check with your HR or payroll office to find out if you are affected.
Here's a fact sheet with more information.
TSP forms and publications are continuously being revised and updated. If you have a form or a publication that has a revision date older than October 2005, it is probably obsolete. It is usually best to acquire publications and forms directly from the TSP Web site.
The TSP also has a new e-mail service called GovDelivery that will notify you when there's something new on the Web site. To sign up, click here.
Word to the Wise
Finally, here's a piece of investment advice: Pick a strategy and stick with it.
According to the TSP, $25 million was removed from the life cycle (L) funds during August. No, it wasn't Internet theft; some participants were worried about having money invested in the roller coaster stock market (the L funds diversify your investment between all five TSP investment options) and opted for the safe and secure G Fund.
The life cycle funds rebalance daily and reallocate funds quarterly. This is done to balance the risk and reward of investing for the long term. These funds were designed to operate on an autopilot basis. As one TSP executive has said, you should treat your account like a car wreck on the highway: As tempting as it may be to look, stay focused on the road ahead of you.
Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.
By Tammy Flanagan
September 7, 2007