Recent laws mean plan, up 8.9% for the year, will continue to add assets
The nation's largest retirement plan is only getting larger.
The Thrift Savings Plan, Washington, the retirement system for 5.4 million federal employees and members of the uniformed services, saw its assets climb 8.9% year-over-year to $578.8 billion as of Sept. 30. That's up from $375.1 billion in 2013 and $210.6 billion in 2008.
Two recent pieces of legislation likely will ensure that growth continues.
The National Defense Authorization Act for Fiscal Year 2016, which was passed in 2015, created a Blended Retirement System within the TSP for all uniformed services members who enter service on Jan. 1, 2018, or later. As of Jan. 23, the BRS has more than 408,000 participants, according to Kim Weaver, director of external affairs.
Moreover, following the passage of the TSP Modernization Act in 2017, the Federal Retirement Thrift Investment Board, which administers the TSP, will implement what Ms. Weaver called its "additional withdrawals project" in September.
The new withdrawal policies will give participants more options for how and when they can access money from their TSP accounts.
While the bill was being discussed, it was estimated that $9 billion is transferred out of the TSP every year into higher-fee accounts when employees leave the federal government. This legislation aims to stem that.
Established in 1986
Established by Congress in 1986, the TSP, a defined contribution plan, offers participants five investment funds: four index funds managed by BlackRock (BLK) Inc. (BLK) and one fund made up of specially issued Treasury securities that is managed internally by the board.
Ravindra Deo took over as the board's executive director in 2017 after initially serving as its chief investment officer.
In a statement, Mr. Deo said that since starting his new role, he has focused on the BRS and expanding withdrawal options for all TSP participants, but those aren't the only changes coming to the TSP.
By the end of 2019, the board will issue a request for proposal seeking two investment managers to manage a portion of each of the index funds, according to Ms. Weaver.
"We're doing that, not because we have any concerns whatsoever with BlackRock, but it is more of a risk mitigation strategy," Ms. Weaver said. BlackRock is eligible to submit a bid once the RFP goes out and a decision will be reached sometime in 2020, she added.
Once the managers are selected, a change will be made to the TSP's I Fund — one of the index funds that invests in international equities — to incorporate emerging markets, Ms. Weaver said. After looking at making the change to its investment lineup five years ago, the board now feels there's sufficient liquidity in emerging markets to move forward, Ms. Weaver added.
Additionally, the new withdrawal policies that go into effect in September will give participants more options for how and when they can access money from their TSP accounts.
For example, currently, participants receiving monthly payments can only change the amount of those payments during an open season between Oct. 1 and Dec. 15. The new policy will allow participants to change the amount and frequency (monthly, quarterly, annually) of their installment payments at any time throughout the year. Also, participants will soon be able to take partial withdrawals while receiving post-separation installment payments.
"It's been an enormous lift for us," Ms. Weaver said of implementing the withdrawal policy.
One of the biggest changes to hit the TSP went into effect on Jan. 1, 2018.
With the creation of the Blended Retirement System, new service members are automatically enrolled in the plan, while those with less than 12 years of service as of Jan. 1, 2018, were eligible to join the BRS. Previously, members of the uniformed services had access to a defined benefit plan but had to serve at least 20 years to receive the annuity.
The payment amount was determined by their years of service and the average of their highest 36 months of basic pay.
Only a small portion of service members reached the 20-year plateau and the Department of Defense was concerned its employees weren't properly saving for retirement, Ms. Weaver said. The BRS offers service members a defined contribution option as part of the TSP as well as a reduced pension should they hit the 20-year mark.
And the number of separated participants — those who no longer work for the federal government but have elected to keep their money in the TSP — has also climbed in recent years to 1.46 million as of Sept. 30 from 1.11 million five years prior.
"We're low-cost, we're efficient, I think they're comfortable with us because they deal with us throughout their entire careers and we care about them and we try and show that," Ms. Weaver said of the TSP's 5.4 million participants.