New lifecycle funds coming to the TSP this summer, hopefully

Federal Report

New lifecycle funds coming to the TSP this summer, hopefully

The Thrift Savings Plan is scheduled to implement a series of new lifecycle funds later this summer, if the coronavirus pandemic doesn't derail the scheduled ro...

Nicole Ogrysko@nogryskoWFED

March 30, 2020 1:00 am

4 min read

New lifecycle funds are coming to the Thrift Savings Plan this summer.

That’s the plan, anyway.

The coronavirus pandemic, which has disrupted nearly every facet of daily life, has a chance of upending many major government projects initially planned for this year.

Adding a series of new L funds could be one of them, the Federal Retirement Thrift Investment Board said last Monday.

Multiple offices within the TSP agency are working to implement a series of new L funds in five-year increments, not the usual 10. The plan has been in the works for nearly two years.

The TSP already has an L 2020, L 2030, L 2040 and L 2050, as well as an L income fund. In a few months, the TSP will add six new funds:

L 2025
L 2035
L 2045
L 2055
L 2060
L 2065

The 2065 L fund is geared toward the plan’s youngest participants, many of whom are members of the military, said Sean McCaffrey, the chief investment officer for the Federal Retirement Thrift Investment Board.

The TSP created the L funds back in 2005. The goal was to create a series of funds that allows participants to better target their investments toward their own goals and timelines, adjusting risk downward as they approach retirement.

Adding five-year increments will let participants target their investments toward a more specific retirement goal, McCaffrey said.

“Newly auto-enrolled participants will have their investments default to the age appropriate L funds,” he told board members last week. “As always, participants will be free to make different choices at enrollment to their contributions and they may transfer balances to any of the other funds offered by the TSP.

These changes are happening now because they’ll coincide with the retirement of the L 2020 fund. The FRTIB will automatically roll participants still in the L 2020 fund into the L income fund when the change-over happens.

Speaking of the change-over, it’s still scheduled for July 1, but the plans may change depending on the coronavirus pandemic.

“We’re juggling priorities every single day and the priorities seem to change every single day,” Ravi Deo, the FRTIB’s executive director, said, “We will … update the board immediately should the schedule change, because this is a fantastic improvement to the TSP and definitely one that will help our participants. It’s just something that may slide if things get even weirder than they already are.”

Beyond implementation of the new L funds, the TSP will also administer some of the new relief measures for federal retirees, which Congress included in the new, $2 trillion coronavirus stimulus and emergency appropriations package.

You can read more about those provisions here, but here’s the short version: Individuals impacted by the coronavirus can now withdraw up to $100,000 from their retirement accounts without incurring the typical tax penalty.

Only catch? You have to pay the money back in three years.

There’s another provision too that should help retirees of a certain age hold onto to more of their savings. The stimulus package temporarily waives required minimum distribution (RMD) rules for certain retirement plans, the TSP included.

Implementing these two provisions will also take time and energy for the TSP.

Plus, the agency has to maintain TSP operations during the pandemic. The FRTIB has a plan to keep contact and operations centers up and running, which may include moving their contractors to telework.

They’re not ready for telework just yet, but the TSP has said contractors should be able to continue most transactions for participants. Transactions that require the mail may take longer.

Response times on the TSP’s “ThriftLine” — which the FRTIB said is already fielding a higher than usual volume of calls — may drop if the call center experiences a large rate of absenteeism due to illness.

Coronavirus and your retirement checks

We’ve received a few questions from readers this week who have asked about the status of their retirement checks from the Office of Personnel Management.

OPM spokesman Anthony Marucci told us annuitants will continue to receive checks.

“There has been no disruption of retirement services,” he said last week in an email.

Many federal retirees have the option of receiving their checks through direct deposit, and for many annuitants, these checks are likely an automatic transaction anyway.

As for the employees processing annuitant claims through a mostly paper-based process, OPM didn’t directly address questions about its plans for the retirement services workforce.

“OPM Retirement Services is following the guidance issued on maximizing telework where possible while maintaining service to the American people,” Marucci said.