TSP L Funds Now Default Choice For New Federal Employees

tsp l funds

Starting this week from Sept 5, new and rehired federal employees being autoenrolled into the Thrift Savings Plan (TSP) will end up with the L Funds as their default choice.

The Federal Retirement Thrift Investment Board (FRTIB) announced in the Federal Register that it is amending its regulations to change the default investment fund from the G Fund to the Lifecycle.

This applies only to new and rehired employees, so current federal employees who are already autoenrolled into the G Fund by default will not be affected in any way.

The FRTIB, which administers the TSP, published a proposed rule to this effect with request for comments on July 13, 2015. The Agency received no comments and is publishing the proposed rule as final without change.

Why Are New Federal Employees Being Enrolled Into TSP L Funds?

The G Fund, which is invested in treasury bonds, is obviously the most stable of the TSP funds. However, this stability provides significantly lower returns for investors compared to the other funds. The L Funds, on the other hand, are a mix of the TSP’s five funds, and provide a better balance of returns and stability.

The FRTIB approved the measure to make the L Funds the default investment for new federal employees only after certain other conditions were agreed upon. This includes notifications to employees of their default plan, and the understanding that any investments other than those made in the G Fund are made at the employees’ own risk.

The investment in funds other than the G Fund is not protected by the United States Government or the Board against any loss, and neither the United States Government nor the Board guarantees any return on the investment.

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