TSP Officials Report Continuous Service Despite Coronavirus, Market Volatility

Officials at the federal government’s 401(k)-style retirement savings program said Monday that they have been successful so far in handling an increased number of participants’ questions and requests in light of the coronavirus outbreak and extended market volatility.

Sophie Dmuchowski, policy operations director at the Thrift Savings Plan, said that despite an increase in call volume and other transactions, the agency is still meeting its service goals.

“There’s also been an increase in inter-fund transfers and contribution allocations, but basically a lot of those transfers and allocations come in automatically, so that doesn’t really put a huge impact on the physical work someone has to do, because it’s automated,” Dmuchowski said. “We’re hoping that these service levels will continue, but we’ll see, based on this rapidly changing environment.”

TSP Chief Investment Officer Sean McCaffrey highlighted the last several weeks of trends in the stock market, which he said sparked a record number of inter-fund transfers at the TSP since the agency first instituted a two-per-month limit in May 2008. After participants file two inter-fund transfers in a month, they can only make transfers into the G Fund, which is made up of government securities.

“If you look between Feb. 24 and March 17, inter-fund transfers brought a net flow of $21 billion into the G Fund,” McCaffrey said. “It marked the highest volume of [inter-fund transfer] activity in both absolute dollars and as a percentage of assets since we introduced the monthly limit in May 2008. But despite that activity, there’s another stat that I think will provide some context. Over that same period, approximately 5% of participants submitted an inter-fund transfer request. That means 95% of our participants were not spurred to action by the recent volatility.”

TSP spokeswoman Kim Weaver said she is monitoring legislation on Capitol Hill that could provide some relief to TSP participants, although it could produce headaches for staff. A provision of the nearly $2 trillion stimulus package currently being negotiated in the Senate would waive the 10% tax on early 401(k) and TSP withdrawals up to $100,000 for people impacted by the coronavirus outbreak in some way, retroactive to Jan. 1, 2020, effectively giving them three years to either pay the tax or reimburse their plans.

“The people who would be eligible are quite broad: if you’ve been diagnosed with COVID-19, if your spouse or dependent has been diagnosed, or if you’ve experienced adverse financial consequences like you’ve been laid off, unable to work due to child care, etc.,” Weaver said. “There could be some administrative difficulty with this, just because of the breadth of its application.”

Weaver said the bill also includes a waiver on the requirements that people must take a minimum withdrawal from their account once they become 70 1/2 years old for the 2020 calendar year.