The Federal Retirement Thrift Investment Board (Agency) has changed the default enrollment plan in the TSP for new federal employees.
Up to now, the policy has been that new enrollees in the Thrift Savings Plan were automatically enrolled in the G Fund unless they chose one of the other options.
In addition, if a new enrollee selected an investment in any fund other than the G Fund, they were required to acknowledge that the decision was made at the employee’s risk, that the employee was not protected by the United States Government or the Board against any loss on the investment, and that neither the United States Government nor the Board guaranteed any return on the investment.
Effective Sept. 5, the FRTIB is amending its regulations to change the default investment fund for certain participants in the Thrift Savings Plan.
All deposits made on behalf of a participant first enrolled on or after September 5, 2015 who does not have a contribution allocation in effect will be invested in the age-appropriate TSP Lifecycle Fund.
According to the TSP, the L Funds’ strategy is to invest in an appropriate mix of the G, F, C, S, and I Funds for a particular time horizon, or target retirement date. The investment mix of each L Fund becomes more conservative as its target date approaches.
Once a contribution allocation becomes effective, it remains in effect until it is superseded by a subsequent contribution allocation or the participant’s account balance is reduced to zero.
If a rehired participant has a positive account balance and a contribution allocation is in effect, then the participant’s contribution allocation will remain in effect until a new allocation is made. If, however, the participant has a zero account balance, then the participant’s contributions will be allocated to the age-appropriate TSP Lifecycle Fund until a new allocation is made.
A check of the current year-to-date rates of return show that for August, while the G Fund was positive, all the lifecycle funds were negative for the month.