Happy New Year from FedSmith!
This is the time of year when I like to reflect on events from the year and their impact on the federal community.
I’ve highlighted what I felt were some of the biggest events of 2020 for federal employees below, but first, I wanted to say thank you to all of you who read my articles and the FedSmith site each day. I enjoy the opportunity to work with our authors to provide important news to the federal community, but it would not be possible without our readers, so thanks to all of you for continuing to give us the opportunity to provide this service.
FedSmith would not be possible without our authors who take the time to share their knowledge and expertise with the federal community. Thanks to them, you are able to read a wide variety of articles on topics ranging from pay and benefits, retirement or human resources. If you ever come across an article that you find particularly useful, please consider taking a moment to let the author know that it was helpful to you.
Hey 2020, Don’t Let the Door Hit You on the Way Out!
I suspect most of us are glad that the year is finally over.
If you weren’t a germaphobe before 2020, you most likely are now thanks to COVID-19.
The virus drove many of the events during the year. One such change was a sharp increase in remote work. Many federal employees who had never done telework before suddenly found themselves working at home.
Our readers told us they thought this model was successful and could continue long-term in the federal government. They also said that not having to work in their usual office environments in 2020 made them feel safer.
But after all the seemingly endless bad news that came during the year related to the virus, 2020 ended on a positive note with the arrival of two vaccines. It appears their distribution will spread quickly as we head into 2021 and hopefully help to repair the damage to the American psyche and allow us to slowly return to a sense of normality.
Highlights of 2020 for Federal Employees
Thrift Savings Plan
The stock market tanked in late February and in March in response to the pandemic. However, despite briefly officially crossing into bear market territory, the markets rebounded at an amazing pace and went on to set new records late in the year.
Federal employees who participate in the TSP and didn’t panic when the market turned south and instead stayed invested and kept contributing were rewarded handsomely. November, for instance, saw remarkable gains in the TSP funds.
FedSmith published numerous articles during the period of extreme stock market volatility written by our authors who are financial advisors who specialize in working with federal employees encouraging TSP participants to not panic and stay the course. These are a few examples:
- Is Now the Time to Move to the G Fund?
- The Coronavirus Pandemic and Your TSP
- What the Coronavirus Means For Your Money
- What Should I Do With My TSP?
Hindsight is always 2020 of course, but the pain of 2020 can provide all of us with an important positive lesson: time in the market rather than timing the market is the better long term investing plan.
TSP Changes Related to COVID-19
In response to the COVID-19 pandemic, the federal government passed the CARES Act, one part of which allowed federal employees to make a withdrawal from their TSP accounts without the usual 10% penalty. In a very dire financial situation, such a move might be warranted, but as FedSmith author John Grobe urged FedSmith readers, “Honey, Don’t Hit Your TSP.”
Another provision of the CARES Act was that the required minimum distributions were waived for eligible accounts and individuals that would normally have to take them. The TSP followed suit on implementing this and said, “You do not need to make any withdrawals from your TSP account in 2020 to satisfy an RMD, regardless of your age or employment status.”
New L Funds Launch
Significant changes were made to the TSP’s L Funds starting July 1, 2020. The L 2020 Fund was officially retired, and the TSP added 5 year incremental L Funds.
Higher Automatic Enrollment Percentage
The TSP also increased the automatic enrollment percentage for new plan participants from 3% to 5%.
No New I Fund Index
The TSP backed down from a planned change to the I Fund to change the investment index it tracks after political pressure from Washington because of investments in Chinese companies.
Schedule F Executive Order
President Trump issued an executive order that would make significant changes to the federal government’s personnel system. Impacted federal employees would not be subject to the procedures and appeal rights available to most federal workers. Whether or not the change will remain in place under the Biden administration remains to be seen.
Paid Parental Leave
On October 1, 2020, a new paid parental leave benefit went into effect for federal employees. Eligible federal employees can now get up to 12 weeks of paid leave for the birth or adoption of a child.
We wish everyone all the best for the coming year!