Enrollment in Newest TSP Fund Surpasses Predictions

Government employees have signed up for the lifecycle funds of the Thrift Savings Plan in far greater numbers than predicted.

Less than a year after the L Funds were launched as a way to make retirement planning easier, 9 percent of the thrift plan's participants have added them to their portfolios, according to data released yesterday by the Federal Retirement Thrift Investment Board. The plan had projected that the participation rate would be 5 percent during the first two years.

The participation rate has "blown the doors off our wildest expectations," said Gary A. Amelio , the board's executive director.

As of last month, about 329,000 government employees had invested $11.6 billion in the L Funds -- about 6 percent of the plan's assets.

The Thrift Savings Plan, a 401(k)-type program founded about 20 years ago, features a government securities fund, stock funds and a bond fund. The L Funds build on those core funds and let participants diversify their savings by selecting an investment mix that most closely meshes with the time that they expect to draw down their savings.

The L Funds allocate participant savings among the core TSP funds according to ratios that professional managers have determined can produce the maximum return for the minimum risk. The investment approach varies by time frame.

The L Funds include an option for those who expect to retire soon, the L Income Fund, and four others for those with more distant drawdown dates, known as the 2010, 2020, 2030 and 2040 funds.

The most popular L Funds are the 2020 for employees covered by the Federal Employees Retirement System, 2010 for employees in the older Civil Service Retirement System and 2030 for the military and other uniformed personnel, according to TSP data.

The L Funds have performed well, compared with the two TSP funds -- the government securities, or G Fund, and the large common-stock index fund, or C Fund -- that hold the bulk of participant assets.

Since Aug. 1, 2005, when the L Funds began, they have posted gains from 5 percent to 8.98 percent. The G Fund has posted a 4.38 percent rate of return, and the C Fund has gained 4.59 percent.

Despite the good start for the L Funds, not all plan's investors turned to them as a refuge when the stock market lurched downward in the first two weeks of June.

The plan's data show that about 215,000 participants took several million dollars in savings out of the international and domestic stock funds and a bond index fund last month. They transferred $134 million into the L Funds and $1.66 billion into the G Fund, which allows federal employees to earn rates of interest similar to those of long-term government securities without risk of losing principal and with little volatility in earnings.