'Softening' participation in TSP

Monday - 12/19/2011, 7:44pm EST

Tom Trabucco, director of external affairs, Federal Retirement Thrift Investment Board

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By Jack Moore
Federal News Radio
@jmooreWFED

As an uneven trading year comes to a close, the Federal Retirement Thrift Investment Board has noticed a slight decline in the number of active participants in the Thrift Savings Plan, federal employees' 401(k)-style plan.

"We noticed this month some softening in the participation," said Tom Trabucco, director of external affairs at the Federal Retirement Thrift Investment Board, which oversees the TSP. Trabucco summed up the findings of the latest board meeting, which is also the last of the year, on In Depth with Francis Rose.

TSP participation had been bolstered by automatic enrollment and earlier contributions by employees, he added. But participation dropped slightly in November — from 85.4 percent to 85.2 percent.

The board says the slight decline can be explained by three factors:

  • Hardship withdrawals, which Trabucco said usually happen this time of year. "This year is no exception," he added. "People need some extra funds, and if they get into a bind, then they can take a hardship withdrawal." However, if they do, they can't contribute their own funds to the TSP or receive matching contributions for six months, which negatively impact participation rates.

  • "Retirements are starting to kick in," Trabucco said. Employees are no longer contributing to the TSP, but the board hasn't yet received their separation letters, meaning they're still counted as possible particpants. Trabucco said the numbers don't bear this out yet, but he expects they will.

  • Finally, some employees may have reached their contribution limits before the end of the year, he added.

While the drop in participation was slight, Trabucco said the large pool that is the TSP means even small fluctuations could point to something larger. In a plan of 4.5 million participants, even a slight dip in percentage points indicates a fairly large number of people, he explained.

Disappointing December?

As for TSP returns, December has been mostly unsatisfying and is set to cap a "rocky, up-and-down year," Trabucco said.

Through Dec. 16, the G, F and L Income Fund all posted positive returns for the year. However, the remaining seven funds are set to close the year in negative territory, he added.

"It'll take a real surge to eke out an annual increase this year in those funds," Trabucco said.

While Trabucco said it didn't look like there would be any year-end "Santa Claus rally," if you're anticipating a transaction before the New Year, he recommended a visit to the TSP's year-end transaction-processing schedule to see when the TSP is operating as well as the cut-off dates for when withdrawals are classified under 2011 and when they switch over to 2012.

CSRS employees heading into retirement

Finally, Trabucco offered a "free-standing statistic," about the declining number of participants covered by the Civil Service Retirement System.

But this is likely a more positive decline.

The number of active TSP participants covered by the CSRS, the retirement system predating the current Federal Employees Retirement System, has dropped by 5,000 in the month of November, alone, down to 194,000, Trabucco said .

"It looks like a lot of CSRS-ers are moving smartly off into retirement and then we'll probably see a fairly large number of CSRS-ers joining that group for the month of December as well," Trabucco said.