Starting July 1, participants in the Thrift Savings Plan will be able to change the amount they contribute from their salaries toward retirement at any time, officials said yesterday.
The last TSP "open season" will be held from April 15 through June 30, ending a twice-a-year ritual for thousands of federal employees who use the 401(k)-type program to augment their government pensions.
It's "just an incredible change" that will free TSP participants to more easily make investment choices and should make the program more attractive to government employees, said Alejandro M. Sanchez, a member of the Federal Retirement Thrift Investment Board.
Congress and the thrift board agreed last year that open seasons were no longer necessary after the TSP installed a new record-keeping system that permits daily, instead of monthly, transactions.
Open season rules had led to months-long waits for some employees trying to start and stop their TSP contributions. Near the end of last year, Congress approved legislation that eliminated the open seasons, which in recent years have started each April and October.
TSP's last open season will coincide with board plans to roll out in mid-summer a new option called "lifecycle funds," which would automatically change the mix of stocks, bonds and securities held by participants through the five funds offered by the TSP.
Government employees who decided to invest in the lifecycle funds would pick the date that they intend to start drawing down their TSP savings, such as at retirement or later. Based on that timeline, the lifecycle option would adjust each participant's portfolio to become more conservative, or less risky, as the draw-down date approached.
The thrift board has hired Mercer Investment Consulting Inc. to help design the lifecyle funds and CitiStreet to develop a strategy for educating participants on how they work.
Mercer has recommended that the thrift board consider offering five lifecycle funds: a "current income" fund, a 2010 fund, a 2020 fund, a 2030 fund and a 2040 fund.
As the year 2010 approached, the 2010 fund would collapse into the current fund, which would be weighted toward income rather than long-term investments, and the board would authorize a 2050 fund.
Andrew M. Saul, the thrift board chairman, said the introduction of lifecycle funds into the TSP will encourage employees to rethink their retirement planning. Lifecycle funds typically help people who do not have the sophistication to make investment decisions, but Saul said many people simply need information presented in new ways and with time to digest. "You need to be able to give them the tools to act," he said.
At the end of January, the TSP had 3.42 million participants and $151.3 billion in assets, reported Gary A. Amelio, the board's executive director.
About 54 percent of the participants are covered by the Federal Employees Retirement System, about 13.5 percent are covered by the old Civil Service Retirement System, and another 13.5 percent are military personnel, Amelio said.
The remainder are mostly retirees and former government workers who continue to maintain accounts.
Two TSP funds -- the C Fund and the G Fund -- continue to be the most popular investment choices. In January, 42 percent of TSP assets were in the C Fund, the common stock index fund that tracks the S&P 500, and 39 percent of TSP assets were in the G Fund, the government securities fund that provides a small but steady rate of return.
Baldrige Tuneup
The Federal Consulting Group, a part of the Treasury Department, will sponsor a half-day training workshop March 29 on the Malcolm Baldrige National Quality Award.
Last year, President Bush signed legislation that permits federal agencies and nonprofit organizations to apply for the Baldrige award for the first time in 2006. The award, created by Congress in 1987, celebrates improved competitiveness and business performance.
For information, go to www.fcg.gov or call 202-906-6068.
NSPS on Diary Live
Mary E. Lacey, program executive officer for the National Security Personnel System at the Defense Department, will take questions and comments on the new pay and performance system at noon today on Federal Diary Live at www.washingtonpost.com.
E-mail: barrs@washpost.com
