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TSP Outlines Impact of New Lifecycle Fund Implementation

Next week, officials at the federal government's 401(k)-style retirement savings program will begin offering lifecycle funds in five-year increments, moving the options in line with private sector counterparts.

Officials at the federal government's 401(k)-style retirement savings program on Monday outlined how the Thrift Savings Plan will implement a series of new lifecycle funds to align its offerings more closely with the private sector.

The TSP's lifecycle (L) funds shift participants' money to more stable investments as they get closer to retirement. The program has traditionally offered L funds in 10-year increments. But in 2017, the Federal Retirement Thrift Investment Board, which administers the TSP, voted to begin offering L funds in five-year increments, a measure that provides participants a closer trajectory with their actual retirement date and that mirrors offerings by private sector 401(k) providers.

At a meeting Monday, TSP project manager Sahr Nyandemoh said the agency went through 10 weeks of testing and more than 400 test cases to ensure the project would come online smoothly when implementation begins on June 30. In addition to adding the L 2025, L 2035, L 2045, L 2055 and L 2060 funds, the TSP will roll the L 2020 fund into the existing L Income Fund, which is designed for people who have already begun making withdrawals.

"On June 30 at noon, the option to conduct interfund transfers for the L 2020 fund will be unavailable, and the new funds will become available at 12:01 [p.m.]," Nyandemoh said. "IFTs submitted into the new funds will be processed that night and will appear on July 1, while the L 2020 will roll into the L Income Fund on June 30."

Nyandemoh said that although interfund transfers will be offline for L 2020 participants after noon on June 30, they all will have the option to transfer into whichever L Fund they like on July 1. Similarly, all participants will be able to move their money into any of the new L Funds once they come online, using the existing interfund transfer process.

In preparation for the L 2020 Fund "retirement," the TSP has sent notices to participants invested in the fund informing them that it will soon roll over into the L Income Fund, and will send an additional notice confirming that their money has moved to the new portfolio on July 1.

Once all of the new funds are in place, new federal employees will automatically be enrolled in one of the lifecycle funds based on their age, just as they already are automatically enrolled in the existing 10-year increments.

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