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Shows & Panels
TSP mulls mutual-fund option
Tuesday - 10/23/2012, 8:27pm EDT
The board addressed that topic at its monthly meeting Monday, Kim Weaver, the director of external affairs, told In Depth with Francis Rose. However, the board is still studying the issue, Weaver said, and no changes are imminent.
Option would expand investment options
The mutual fund window would allow participants to move investments out of the TSP funds they've invested in and into a private-sector suite of mutual funds.
The 2009 Thrift Savings Plan Enhancement Act updated the TSP to include automatic enrollment and immediate agency matching contributions as well as the Roth option. On the issue of a mutual fund window, it left the door open — authorizing the board to consider one — without specifically requiring any action.
The option would expand participants' investment options, which federal employees have called for in the past.
"There have been, over the years, a whole host of proposals for specific TSP funds," Weaver said. "There are terror-free funds, socially responsible investing, gold funds ... You name it, there've been people who've wanted specific TSP funds."
But in expanding those options, the board wants to ensure it maintains the TSP's simplicity.
"One of the geniuses of the TSP is that it is a really simple plan with limited funds ... And we have always been careful to guard that and make that low-cost option available to our participants," Weaver said.
No 'pent-up demand' for the plan yet
And there's still a long process ahead, Weaver said. "No one should be expecting that by Christmas this is going to be something that's available," she added.
So far, Weaver said, employee groups and unions on the Employee Thrift Advisory Council are not "sensing any pent-up demand" for the option. But the board will continue to study the issue over the next year, examining how the mutual fund window works in private-sector retirement plans as well as how costs would be distributed to participants.
Fee disclosure will take up a large part of the deliberations.
The Labor Department is adamant that 401(k) plans, both public and private, publicize fees to their participants. In the TSP, fees now make up less less than 50 cents per $1,000 invested, Weaver said.
"So, one of the challenges we would have is if money were going to go outside the TSP into a private-sector suite of mutual funds, we would have to make sure that those participants realized the cost differential," she said.
Roth TSP going strong
Weaver said the board has been pleased by the robust investments made in the Roth option, which rolled out in May, with staggered launch dates coming later for DoD civilians and the military. The rollout was delayed because various payroll departments across the government needed more time to prepare their systems to process the transactions.
By the end of September, 51,354 federal employees had made Roth TSP contributions, with a total value of $48.7 million.
"So, as we had hoped, there has been a slow and steady uptick in Roth participation," Weaver said.