The Thrift Savings Plan announced yesterday that participants may start using "lifecycle funds" Aug. 1 to save for their retirement.

The TSP, a 401(k)-type program for government employees, will begin offering five L Funds, as they are being called, on that date. But employees may want to view them more as a diversification tool than as new funds, since they will use the TSP's existing five funds as their foundation.

With the L Funds, participants can turn over the asset allocation and rebalancing chores involved with long-term Wall Street investments to professional managers who take into account their age and strive to grow their savings while taking no more risk than necessary.

Employees with many working years ahead of them, for example, will be able to select an L Fund that shifts them from aggressive to conservative investments as they near the time they will start drawing down their savings. Employees on the verge of retiring or receiving monthly payments from the TSP may choose the L Fund that minimizes stock holdings and keeps 80 percent of accounts in super-safe government securities and in a bond fund.

TSP officials hope that government employees will select an appropriate L Fund and shift their savings into it, but no one will be forced into an L Fund. Employees can opt to keep their savings in existing funds or put just a portion of their contributions or savings into an L Fund.

The TSP is one of the world's largest retirement savings programs, and officials have promised an all-out campaign to educate participants on one of the biggest changes in the program since its start in the late 1980s. The TSP has assets of more than $159 billion and more than 3.4 million participants, including civil service, postal and military personnel.

Officials began the rollout yesterday, posting L Fund information on the agency's Web site ( TSP participants are being mailed a postcard announcing the new funds and will be asked to watch for a DVD that will be mailed later.

"Proper asset allocation is critical to optimum long-term growth in retirement savings," Gary A. Amelio, executive director of the Federal Retirement Thrift Investment Board, said in a statement yesterday.

"Whether participants have it done automatically for them by using the L Funds, or do it themselves, this DVD will help them understand this important concept," Amelio said.

According to the TSP, the L Funds will diversify participant accounts among the funds for government securities, bonds, large stocks, mid-size and small stocks, and international stocks currently offered.

The projected returns for the L Funds will be similar to a weighted average for the existing funds, with earnings calculated daily, the TSP said.

Participants interested in L Funds will be asked to answer this question: "After I leave federal service, when will I need the money in my TSP account?"

Employees who think they will start drawing down their savings between 2015 and 2024, for example, would select the "L 2020" fund. That fund's initial allocation will steer 65 percent of the participant's money into the TSP's three stock funds, put 27 percent into the government securities fund (G) and 8 percent into the bond fund (F).

Special Rate Saga Ends

Checks totaling more than $87 million are being mailed this week to federal employees covered by the class-action, "special rate" settlement, the National Treasury Employees Union announced.

A 1982 regulation improperly denied raises to employees placed on special salary schedules, prompting two decades of litigation by NTEU. The settlement covers about 212,000 current and former employees, and the first payout, about $81 million, was made in December 2003.

Goodbye GS?

Today's recommended reading: Clay Johnson III, a deputy director at the Office of Management and Budget, told The Post yesterday that the Bush administration is ready to start the debate on government-wide pay changes, including the phaseout of the General Schedule. Story on A2.