Multiple offices are working day and night within the TSP agencies to bring a new series of L funds within increments of five-year tenure (Yes, you read it right! Five not ten years tenure). The government has been working on this plan for almost two years.
The TSP has an L 2020, L 2030, L 2040 and L 2050, and an L income fund. After a few months, the TSP will add six more funds with increments of five years:
- L 2025
- L 2035
- L 2045
- L 2055
- L 2060
- L 2065
Sean McCaffrey, the chief investment officer for the Federal Retirement Thrift Investment Board, said that the 2065 L fund is for the youngest participants who are members of the military. TSP created the L funds in 2005 with a mission to create a series of funds allowing participants to focus their investments toward achieving their own goals and timelines, considering risks as they come closer to retirement.
McCaffrey said this new addition of five-year increments would help them target their investments, considering a more specific retirement goal.
He told board members that new and auto-enrolled participants would have their investments plan according to their age by default. Like always, all participants will be free to make their own decisions and make different choices while enrolling in their contributions. They are open to transfer balances to any of the other funds supported by the TSP.
These changes were planned now so that they can run in continuation with the L 2020 fund. The FRTIB will auto-enroll participants in the L 2020 fund into the new L income funds series when the change is required.
The change-over was expected to begin from July 1, but the plans may need changes depending on the ongoing coronavirus pandemic.
Ravi Deo, the FRTIB’s executive director, said we are analyzing priorities every day, but they continue to change every other day. He assured that the board would update the changes whenever the schedules change because this will be a superb improvement to the TSP and will help participants. It will survive even if the situation becomes weirder than what they already are, said Deo.
The new series of L Funds will come into effect, but the TSP will also continue to administer some new relief measures for federal employees. They are already retired and included by the Congress in its $2 trillion coronavirus stimulus and emergency appropriations packages.
An Individual impacted by the coronavirus or imposed on the virus can withdraw up to $100,000 from their retirement accounts without paying any early withdrawal penalty fee, which is a 10% penalty fee.
The only thing that needs to be taken care of is that you have to pay back in three years.
There is another provision that should help near-retirees and already retired employees to get hold of some of their savings. The stimulus package has waived off Required Minimum Distribution (RMD) rules for individual retirement plans, including the TSP plan.
Bringing these two provisions into full-effect need time and energy for the TSP.
In addition to this, the agencies need to maintain TSP operations during the coronavirus pandemic. The FRTIB has come up with a plan that would help to keep contact and operations centers running, which may be done via teleworking.
Some of the contractors aren’t just ready for the telework, but the TSP has assured that the contractors should be able to provide support to participants’ transactions. Transactions via mail may take a longer time.
The FRTIB said that the Response times on the TSP’s “ThriftLine” are higher because they receive a higher volume of calls than ever. The response time may increase if the centers report a high rate of absentees due to illness.
Some unanswered questions regarding retirement checks
One of the OPM’s spokesmen, Anthony Marucci, stated that the annuitants would receive checks continuously. He sent an email and said there had been no discontinuity of retirement services to the participants.
Many federal employees who are retired will get their checks through direct deposit, and many are expected to get checks via an automatic transaction.
Some employees process annuitant claims via a paper-based process. OPM failed to take up their questions and respond appropriately.
Marucci said OPM Retirement Services is going by the guidance of maximizing teleworking where possible and maintaining check service to the American people.