TSP participants will have 6 new lifecycle funds at the end of June

The six new lifecycle funds represent a shift toward five-year increments rather than the usual 10. The Thrift Savings Plan will also retire the L 2020 fund, wi...

The Thrift Savings Plan will launch six new lifecycle funds early next week — the culmination of a years-long effort to give participants more options for targeting their investments toward a specific retirement date.

The new additions, which represent a switch to five-year L fund increments rather than the usual ten, will go live on June 30. The TSP will also retire the L 2020 fund on the same date.

The TSP already has an L 2020, L 2030, L 2040 and L 2050, as well as an L income fund. By the end of the month the following funds will be available:

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

Starting on June 30 at noon, participants will no longer be able to transfer their assets in and out of the L 2020 fund.

The TSP will automatically move participants enrolled in the L 2020 fund into the L income fund at that time. These participants can transfer out of the income fund and into any of the other lifecycle funds starting July 1.

No other assets will automatically move into the new funds, unless a participant chooses to do so.

“If the participant is currently, for instance, in the 2030 fund but they believe that the new 2025 or 2035 might be a better choice for them, starting July 1 they will have the ability to move both their existing account and any future contributions into the new funds in a proportion that they wish,” Ravi Deo, Federal Retirement Thrift Investment Board executive director, said.

The FRTIB, which has been largely working remotely since mid-March, had said the pandemic could delay the L fund implementation.

But the new lifecycle funds will go live on time on June 30, Sahr Nyandemoh, the lifecycle project manager, told the board Monday.

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. The new  five-year lifecycle increments give participants the option of further targeting their investments to an even more specific retirement date.

The FRTIB had been planning to retire the L 2020 at some point this year, and the five-year L fund increment strategy has been in the works since 2017. The new lifecycle fund additions will move the TSP more closely in line with industry best practices.

The addition of the L 2065 fund also reflects the TSP’s growing population of young participants, particularly those in the blended retirement system, Nyandemoh said.

More than 2.6 million participants are invested in at least one of the existing L funds to date.

New CARES Act relief options with TSP are available

The TSP earlier this month made a few long-awaited relief options available to federal employees and retirees who have been impacted by the coronavirus pandemic.

The options were part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which Congress passed back in March.

Specifically, TSP participants can now borrow up to $100,000 as a general purpose loan, double the usual the $50,000 limit on such loans. Participants can also borrow up to 100% of their vested, available account balances, again, double the usual 50% cap.

The TSP is encouraging participants to apply for these loans online, but it is accepting applications through fax and mail. Participants have until Sept. 18, 2020 to apply for these loans. For privacy reasons, the TSP does not want participants sending supporting and medical documentation in with their loan applications.

According to TSP rules, participants can only hold one general purpose loan at a time.

In addition, participants can also suspend payments on their loans now and through the rest of the calendar year. This applies to loans taken between now and Nov. 30, 2020, as well as existing loans. Again, participants must apply to begin suspending loan payments.

The TSP next month will begin allowing participants to take a one-time withdrawal of up to $100,000, said Tee Ramos, director of participant services for the FRTIB.

Only TSP participants who meet certain requirements are eligible to take these loan or withdrawal options under the CARES Act.

Participants must have tested positive for coronavirus or have a spouse or dependent with a positive diagnosis from a test approved by the Centers for Disease Control and Prevention.

Or participants must have experienced adverse financial impacts as a result of being quarantined, furloughed or laid off during the pandemic. Having reduced work hours or business or being unable to work due to a lack of child care may also qualify participants for these relief options.

Find more information about the TSP’s loan options under the CARES Act here.

The TSP, meanwhile, has seen a continued signs that its participants are emerging from March’s stock market volatility.

Inter-fund transfers (IFTs), for example, are down for the second consecutive month. Participants transferred a little more than $1 billion out of the G fund and into other portfolios in May. The S fund was the biggest beneficiary of those IFTs, with participants moving nearly $1.2 billion into the portfolio in May.

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