Saturday, September 05, 2009

New Thrift Savings Plan (TSP) Features

Thrift Savings Plan (TSP) upgrades were included in the "Family Smoking Prevention and Tobacco Control Act" legislation as riders.

Four key planned features were addressed:

(1.) Roth 401(k) option. The Federal Retirement Thrift Investment Board states that it could have the ROTH option ready in one to two years. Most recently, I have read mid-2011 on some sites for ROTH-TSP implementation.

(2.) Automatic enrollment of new federal civilian employees. Contributions would go directly to the G-Fund. Employees would have 90 days to opt out and receive a full refund. The bill left it up to DoD as to whether or not military personnel will be automatically enrolled. DoD has stated that they will automatically enroll personnel in TSP once the ROTH-TSP option is implemented.

(3.) Survivor benefit that would let spouses of deceased TSP participants maintain accounts.

(4.) Mutual fund option that would let participants invest TSP funds in select private sector mutual funds. The Army Times reported that:

It's far from certain that the TSP board will follow through and offer a mutual fund option. Executive Director Gregory Long has described the board's attitude toward mutual funds as "agnostic," though he added that such an option in the TSP could be a "proving ground" for different investment options and could dissuade lawmakers or third-party groups from trying to add new funds to the plan.

You might also be interested to know that TSP now has a feature called the Personal Investment Performance (PIP) number. Your PIP truly reflects your own TSP return.
"The Personal Investment Performance (PIP) number is a combined rate of return earned on all of the funds you held in your TSP account during the year covered by the annual statement. Your personal performance is based on the performance of your investments and on the timing and amount of your purchases (e.g., contributions) and redemptions (e.g., loans and withdrawals) as well as the effect of any interfund transfers. Therefore, your personal performance may differ substantially from the performance of the investments themselves. The TSP uses the Modified Dietz method to calculate Personal Investment Performance. The Modified Dietz method weights individual cash flows by the amount of time that those cash flows are held in the portfolio. This method of calculation is widely used by financial analysts and investment managers to measure the time-weighted returns of investment portfolios." Source: Alamo Gordon News, 6 AUG 2009

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