Two Secure Act provisions alter TSP age requirements

A House bill on employee retirement is proposing changes to federal benefits for participants in the Thrift Savings Plan. Two components of the Securing a Strong Retirement Act of 2021 would impact participants, the Federal Retirement Thrift Investment Board, which is in charge of the TSP, said at its monthly meeting.

First, the bill would increase the required start date for mandatory distributions for participants. The current required minimum distribution age is 72. Under the bill, the age is 73 for those who turn 72 starting in 2022 and who turn 73 before 2029. The age is 74 for those who turn 73 after 2028 and who turn 74 before 2032. And, the age is 75 for those who turn 74 after 2031. These changes apply to distributions starting in 2023.

Second, the bill would require all catch-up contributions to be Roth contributions. The changes to this section of the bill would become effective starting at the date of enactment of the bill. The House is slated to move Secure 2.0 to a vote next week.

As part of the execution of that bill, the board is also working with lawmakers to consider changes to the bill’s implementation date, if it passes. FRTIB said the short turnaround for the first version of the Secure Act caused operational challenges as the board worked to comply with the changes. The legislation passed on Dec. 20, 2019, and became effective just a few weeks later on Jan. 1, 2020.

The board is also following another bill that affects the TSP. FRTIB responded to legislation introduced on March 17 from Rep. Ted Budd (R-N.C.). That bill, the Terminating Securities from Putin Act, would prohibit the TSP from investing in Russia. If passed, the bill would give FRTIB 30 days to review TSP investments and move any funds invested in Russia.

The legislation “draws a line in the sand and provides moral assurances to 6 million members of the military and the federal workforce,” Budd said in a statement.

The board said that none of the TSP funds currently contain Russian investments.

Aside from the two bills, Congress is also working to complete a markup of the five FRTIB nominees at the end of this month, on March 30. The markup follows a nomination hearing from the Homeland Security and Governmental Affairs Committee earlier this month. President Joe Biden announced four of those nominations in August of last year, and the fifth and final nomination a few months later in November. The board members oversee the TSP and the Federal Labor Relations Authority.

Participation climbs as board resolves staffing issues

Outside of Congress, the board is also looking at participation numbers for the TSP. The number of participants who receive the full matching rate continued to climb this month, the board said. In particular, active duty participants in the Blended Retirement System are up to almost 78%.

Along with those groups, participation in the Federal Employees Retirement System (FERS) has increased to 95% for the month of February, a new milestone for the program. That’s up from 94.9% last month and 94% at this time last year. Meantime, participation from Uniformed Services has risen to 81.1%. That number was at 77% this time last year. The number of participants also increased for the L funds in February, largely due to automatic enrollment for new participants.

The rising participation for TSP adds pressure to the board to resolve ongoing staffing and recruitment challenges at contact centers. Those staffing shortages largely stem from pandemic and supply chain issues. The TSP said last month it hoped to get its service levels back on track by March, and it said that it has now achieved that goal and is beginning to pay dividends.

Although participation rates for the TSP are going up, the board reported that the overall plan balance continued to decline this past month. Contributions and disbursements for the fund have been increasing since 2012, but there’s been a slow decrease in net cash flow over the same period. The TSP balance dropped to $769.5 million for February, according to the board’s report. That’s down from $780.6 million in January and $811.7 million in December.

Looking at funds in the TSP, the board highlighted a volatile market as the F, C, I and L funds all posted losses for the month of February, while the S fund remained relatively flat. Inflation rates and geopolitical concerns, namely Russia’s invasion of Ukraine, caused further uncertainty in the market.

The picture is “mixed” for the month of March so far, the board said. For equities, the C fund is up 1.99%, the S fund is down 0.28% and the I fund is also down by 0.86%. For fixed income, the F fund is down 2.62%, while the G fund is up by 0.12%.

Converge program on track to launch mid-year

As part of an effort to enhance participant experience, the in-progress Converge program will modernize the TSP by overhauling back-end management and security. The board said this month that the program’s progress of is still on track in all areas and is scheduled to launch in the middle of this year. Some of the upcoming features of Converge include a mobile app, a mutual fund window and higher security for the program.

To ensure smooth function of Converge, the board has been testing groups of data for the platform. Simulating processes of the program is part of the board’s effort to make Converge more efficient and easier to use. For data readiness, the FRTIB transferred its fourth and final round of test data for Converge on Feb. 25.

Next month, service changes and planned downtime will occur in preparation for the Converge launch, the board said. All participants and beneficiaries will receive a notice in mid-April regarding those upcoming changes. Those notices will arrive via email to participants with contact information available, or otherwise through the mail. The board is also working with third-party partners to ensure all participants receive the notice.

The board said testing is scheduled to wrap up in mid-May and Converge is set to become available to TSP participants in the middle of this year.

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