Participants in the Federal Thrift Savings Plan will soon be able to put a sizeable chunk of their accounts into 5,000 new funds, including those offered by 300 mutual fund families like Fidelity, T.Rowe Price and Vanguard. And they will then be able to put some of their future contributions into any of the new funds up to twice a month.
Nothing will change for those who wish to stick to the traditional TSP. It offers a total of 15 funds, including the C, S, I, F and G funds, plus 10 self-adjusting target date funds.
But those who wish to broaden their investment portfolios into more targeted investments, or funds with social or environmental agendas, can do so. For a price: three new fees including a $55 annual access fee, plus a $95 annual service fee, and a per-trade fee of $28.75.
Whether you decide to stay put with your current options, or invest in some of the new ones, it’s critical to understand how the new system works. So here is the official 9-step fact sheet on the new Mutual Fund Window (MFW):
On June 1, 2022, the Federal Retirement Thrift Investment Board launched a mutual fund window (MFW) for Thrift Savings Plan participants.
The use of the MFW is entirely voluntary. TSP participants will remain invested in the same five core funds and the 10 target date funds that the TSP currently offers unless they choose to invest in a mutual fund through the MFW.
The MFW offers roughly 5,000 mutual funds in roughly 300 mutual fund families, including those offered by Fidelity, T. Rowe Price, and Vanguard. For funds with multiple classes, the lowest expense ratio class is offered.
To exercise this option, participants must log into their TSP account and then open an MFW account before they can transfer money from their TSP account through the MFW and select the mutual fund(s) in which they choose to invest.
All the mutual funds on the platform comply with all applicable U.S. laws and regulations, including those promulgated by the Securities and Exchange Commission (SEC) and the Office of Foreign Assets Control (OFAC). The mutual funds on the TSP MFW platform will follow the same rules applicable to any other mutual fund offered in any other public or private retirement plan in the United States.
The mutual funds available on the MFW platform have not been reviewed by TSP fiduciaries to determine whether they are wise investments for any individual TSP participant. This means that participants must carefully review the prospectus for each mutual fund and decide which ones will meet their investment goals, as they would if choosing a mutual fund outside the MFW.
TSP participants who choose to avail themselves of the MFW will be able to use a Morningstar-developed search tool to find mutual funds that meet their specific investment interests. They will be able, and in fact encouraged, to review any mutual fund’s prospectus before investing to have a thorough understanding of the fund’s goals and investments.
In accordance with the statutory requirement that TSP participants using the MFW bear the cost of the MFW, all TSP participants electing to invest in the MFW would incur additional fees: an administrative fee of $55 annually; an annual maintenance fee of $95; a per trade fee of $28.75; and any fees and expenses imposed by the specific mutual fund(s) in which they invest.
To be eligible to invest in the MFW, a participant’s minimum initial transfer must be $10,000 and the investments through the window can equal no more than 25% of the participant’s TSP account value.
The funds that a federal employee or member of the uniform services uses to invest in the TSP or the MFW are personal property, not federal funds. Once a federal employee or member of the uniformed services deposits their paycheck in the bank, it is theirs and not subject to federal control. Money from TSP participants’ paychecks invested in the TSP is exactly the same; it is their personal property and they have property rights under the law.
Any federal employee or member of the uniformed services can, and has always been able to, invest in any mutual fund outside of their TSP account through any mutual fund provider.
The FRTIB provided some interesting background about the mutual fund window program. If you are interested, find it here.