Improving the TSP [for current participants]

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MichDad
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Improving the TSP [for current participants]

Post by MichDad » Fri May 30, 2014 12:14 pm

I've been investing into the TSP since 1987 and my account balance far exceeds $1 million. While I continue to believe that the TSP is a wonderful investment vehicle, I think it can be improved significantly in several respects. I've been considering this and have come up with five things the Federal Retirement Thrift Investment Board could do to improve the TSP. It is my hope that others can contribute to this list by adding items or by critiquing my suggestions. Once I have a vetted list, I plan on writing to the FRTIB requesting that they consider my suggestions. I thank you in advance for considering my suggestions. Here they are:

1. Allow in-plan conversions from the regular TSP to the Roth TSP.
2. Allow TSP account holders to invest their regular TSP contributions in different funds and in different percentages/amounts than in their Roth TSP.
3. Allow TSP account holders to withdraw their regular TSP and Roth TSP funds in different percentages/amounts. For example, if an account holder wants to keep his or her Roth TSP monies in the TSP longer than his or her regular TSP funds, this should be permitted. [I know that under current law, this suggestion cannot be applied to withdrawals resulting from Required Minimum Distributions.]
4. Allow TSP account holders to change their withdrawal options at least annually. For example, we should be permitted to take out different lump sum amounts anytime.
5. Modify the I fund so it will include Canadian equities and equities from emerging markets. If emerging market equities are not included in the I fund, there should be a new fund created (an E fund?) to encompass this sector.

MichDad

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Re: Improving the TSP

Post by placeholder » Fri May 30, 2014 12:32 pm

There were already a couple of threads about things the TSP is thinking about plus what is the actionable content of this post as right now it seems more like a complaint.

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Re: Improving the TSP

Post by rkhusky » Fri May 30, 2014 2:08 pm

5b. + Small Cap International.

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Re: Improving the TSP

Post by oncorhynchus » Fri May 30, 2014 3:28 pm

Encouraging and enabling TSP participants in these forums to press for TSP improvements is just as "actionable" as the multiple threads and Wiki page discussing how employees can effect changes in their private 401(k) plans. I too would like to encourage the FRTIB to step up their snail's pace in making certain changes.

FWIW, after they announced the results of the 2013 participant survey, I commented on the TSP website that I wanted to see in-plan conversion, improvement of the I fund, and allowing separate manipulation of Roth and traditional holdings because I didn't see any of those issues addressed in the survey.

MichDad, I've not looked carefully at the FRTIBs website for a "participant comment" portal; to what address are you sending your message?
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Re: Improving the TSP

Post by stan1 » Fri May 30, 2014 4:21 pm

Could number 4 be stated as allowing an annual lump sum withdrawal/rollover instead of the onetime provision? I also think this should be narrowed to post-retirement. That's more important than in-service partial rollovers (which many 401Ks do not have).

I would also put that one higher on the list, since it should be lower cost to implement (assuming withdrawal/rollover process is automated, which might not be the case).

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Re: Improving the TSP

Post by MichDad » Fri May 30, 2014 4:43 pm

oncorhynchus wrote:
MichDad, I've not looked carefully at the FRTIBs website for a "participant comment" portal; to what address are you sending your message?


I don't want to violate any Board rules so I'll send you the name and address of the appropriate FRTIB manager for receipt of such suggestions via a private message. Unfortunately, you'll have to write to him via snail mail. I don't have his email address, only his postal address.

MichDad

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Re: Improving the TSP

Post by MichDad » Fri May 30, 2014 5:00 pm

stan1 wrote:Could number 4 be stated as allowing an annual lump sum withdrawal/rollover instead of the onetime provision? I also think this should be narrowed to post-retirement. That's more important than in-service partial rollovers (which many 401Ks do not have).

I would also put that one higher on the list, since it should be lower cost to implement (assuming withdrawal/rollover process is automated, which might not be the case).


Stan,

Thank you for your suggestions. I agree with your first point about number 4 and I will incorporate it into my list. You have better expressed what was my original intent.

With respect to your second suggestion, I want to think about it a bit more. I viewed number 1 as the easiest to implement and something that should be important to recently retired federal employees. However, because numbers 2 and 3 also concern the dichotomy between tradition and Roth TSP accounts, I grouped those three items together. That's why number 4 was placed in that position.

MichDad

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Re: Improving the TSP

Post by MichDad » Fri May 30, 2014 5:07 pm

rkhusky wrote:5b. + Small Cap International.


I agree that there should be some vehicle in the TSP to invest in the Small Cap International equities sector. My only question is whether this should be included in the I fund or a separate fund. I fear that if we press for this as a separate fund, the FRTIB will decline to establish any new funds. What do TSP-participating Bogleheads think about this?

MichDad

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Re: Improving the TSP

Post by Alan S. » Fri May 30, 2014 8:31 pm

1) Since non spouse beneficiaries cannot participate in the "Beneficiary Participation Acct", rename it "Spousal beneficiary participation account" or broaden the eligibility.
2) Adopt IRS RMD Table II to conform TSP RMD options to that of the IRS.
3) Broaden retiree distribution options to those of most other DC contribution plans when it comes to flexibility

Participants should not be restricted in distribution options for the benefits they earned by years of participation. That includes the aforementioned pro rata distribution requirements of the pre tax and Roth accounts.

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Re: Improving the TSP

Post by Professor Emeritus » Fri May 30, 2014 11:37 pm

oncorhynchus wrote:Encouraging and enabling TSP participants in these forums to press for TSP improvements is just as "actionable" as the multiple threads and Wiki page discussing how employees can effect changes in their private 401(k) plans. I too would like to encourage the FRTIB to step up their snail's pace in making certain changes.


OFGS No, political changes are not "actionable".

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Re: Improving the TSP

Post by LadyGeek » Sat May 31, 2014 1:42 pm

This thread has run its course and is locked (not personal nor actionable). See: A reminder that non-investing general comment threads are OT

- It must be personal. In other words, you must be asking about your own situation. You can also ask on behalf of someone specific, such as a family member.

- It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation.

Also see: Forum Policy
...Note that topics must be directly connected to your (or your friend's or family's) financial life. General comments or complaints about these topics will be removed.

Update: The Federal Retirement Thrift Investment Board is governed by US law, which makes this a political process (FRTIB: Reading Room "Regulations"). Discussion under this aspect is also off-topic, see: Forum Policy

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited.
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Re: Improving the TSP

Post by Alex Frakt » Sun Jun 01, 2014 10:58 am

After Advisory Board review, we are unlocking this thread. This discussion is on topic as long as it is restricted to the parts of TSP which are under the control of the Federal Retirement Thrift Investment Board. As one of the Advisory Board members put it:

Some changes would require an act of Congress, and those should be off-topic. But others, such as in-plan conversions (which I believe are already under discussion), or allowing regular and Roth accounts to be kept separate for withdrawal purposes (which is presumably an accounting change, not a legal change), are the responsibility of the Federal Retirement Thrift Advisory Board. Proposals by current participants for writing a letter to that board are personally actionable.


So let's keep it to the OP's original question. Posts on legislative changes such as extension of the TSP to the general public are off topic.

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Re: Improving the TSP

Post by MichDad » Sun Jun 01, 2014 12:05 pm

Alex Frakt wrote:After Advisory Board review, we are unlocking this thread. This discussion is on topic as long as it is restricted to the parts of TSP which are under the control of the Federal Retirement Thrift Investment Board. As one of the Advisory Board members put it:

Some changes would require an act of Congress, and those should be off-topic. But others, such as in-plan conversions (which I believe are already under discussion), or allowing regular and Roth accounts to be kept separate for withdrawal purposes (which is presumably an accounting change, not a legal change), are the responsibility of the Federal Retirement Thrift Advisory Board. Proposals by current participants for writing a letter to that board are personally actionable.


So let's keep it to the OP's original question. Posts on legislative changes such as extension of the TSP to the general public are off topic.


I believe that the FRTIB also determines what funds to offer and how those funds are constituted. Thus, the Board could decide to establish an emerging market fund or to add Canadian equities to the existing I fund.

Thank you again!

MichDad

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Re: Improving the TSP

Post by oncorhynchus » Sun Jun 01, 2014 7:20 pm

MichDad wrote:
rkhusky wrote:5b. + Small Cap International.


I agree that there should be some vehicle in the TSP to invest in the Small Cap International equities sector. My only question is whether this should be included in the I fund or a separate fund. I fear that if we press for this as a separate fund, the FRTIB will decline to establish any new funds. What do TSP-participating Bogleheads think about this?

MichDad


I think the FRTIB would be receptive to an argument stressing diversification, but a solution that doesn't require creating a new fund and the additional overhead. I'm also in the camp that believes the limited selection of funds in the TSP is one of its strengths.

My suggestion for the I fund is to switch the tracking index from the current MSCI EAFE to the MSCI ACWI Ex USA NR USD, the same used by VG's Total International Stock Index funds.

o

PS: Thank you Forum Advisory Board for realizing that just because our employer is the federal gov't, discussion of communication to the administrators of our 401(k) is not necessarily "political".
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Re: Improving the TSP [for current participants]

Post by Info_Hound » Mon Jun 02, 2014 8:25 am

I am not sure if this can be done or not by the TSP due to some IRS regulation(s) but having three sets of rules for TSP holders makes it confusing and more complicated than it needs to be. I understand and it makes sense to have one set of rules for actively employeed TSP participants and another for retired TSP participants but then there is a third set of rules for Survivor Beneficiaries (BPAs). From the TSP's current regulations a deceased TSP owner is 'retired' and the surviving spouse can keep the account open and become the new 'owner' with limited management options.

Regardless of who contributed to the TSP during their working career the money is in the plan and whoever the 'owner' is (e.g. surviving spouse) they need to manage the funds the same as other retired TSP participants. The federal employee, during their work career can amass a considerable amount in their TSP account. If they die before they retire, their surviving spouse finds they are faced with very limited options for managing what is potentually the retirement money that was intended for both of them.

My opinion is this is a disservice to the deceased participant and to the survivor. I've read countless threads on this forum about posters who want to educate their spouses on how to manage their retirement/investment accounts like they currently do if they should die. Does anyone take the time to read deeply into the plan rules to see if there are restrictions on what can and can not be done once they as the 'participant' pass on?

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Re: Improving the TSP [for current participants]

Post by TimeRunner » Tue Jun 03, 2014 9:51 am

I support MichDad's first 4 points, and oncorhynchus's suggestion to change the I fund to use the same index as VG's Total International Stock fund (VTAIX). A slight correction as to the index - it has changed a few times over the years and is currently FTSE Global All Cap ex US Index, and that's the one I'd like TSP to use. MichDad, if you post a copy of your letter, I'd be happy to plagiarize it con permisso and send a similar one.
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Re: Improving the TSP [for current participants]

Post by 2cents2 » Tue Jun 03, 2014 11:11 am

Info_Hound wrote:Regardless of who contributed to the TSP during their working career the money is in the plan and whoever the 'owner' is (e.g. surviving spouse) they need to manage the funds the same as other retired TSP participants. The federal employee, during their work career can amass a considerable amount in their TSP account. If they die before they retire, their surviving spouse finds they are faced with very limited options for managing what is potentually the retirement money that was intended for both of them.

My opinion is this is a disservice to the deceased participant and to the survivor. I've read countless threads on this forum about posters who want to educate their spouses on how to manage their retirement/investment accounts like they currently do if they should die. Does anyone take the time to read deeply into the plan rules to see if there are restrictions on what can and can not be done once they as the 'participant' pass on?


I agree. I'm not sure if this is one area that could be easily changed. It is a shame, but under the current rules I think my DH would be better off transferring the funds from my TSP account over to his own 401K account (if I should predecease him) rather than leaving it in as a spouse beneficiary account. The biggest sticking point is what happens to his beneficiary: Death benefit payments made from your beneficiary participant account must be paid directly to your beneficiary(ies). These payments are subject to certain tax restrictions and cannot be transferred or rolled over into an IRA or eligible employer plan. In addition, your beneficiary(ies) will have to pay the full amount of taxes on the taxable portions of the payment in the year it is received. (Your beneficiaries will not owe taxes on Roth contributions, qualified earnings on Roth contributions, and tax-exempt contributions in the account.)

The other problem is when the beneficiary participant account is first established, the entire balance of the account is invested in the Government Securities Investment (G) Fund until another election is made. It seems like this would be easier to change.

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Re: Improving the TSP [for current participants]

Post by texasdiver » Tue Jun 03, 2014 1:48 pm

I'm frankly glad they didn't "improve" it by doing all the things my cohort of younger workers wanted to see happen back in the late 90s during the tech bubble when we Federal workers were chafing at seeing our funds locked into the boring TSP when friends in the private sector were investing their 401(k) funds in high flying tech funds from places like Janus.....Yikes!

The older I get and the more I learn the happier I am with the TSP. It's like how your parents are idiots when you are 16 and somehow manage to get a whole lot smarter by the time you hit 30.

As for improvements to the current program? I wouldn't mind seeing the I fund expanded to include developing markets along the lines of the Vanguard Total International Stock fund. But I suspect the long term difference of such a change would be pretty negligible.

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Re: Improving the TSP [for current participants]

Post by MnD » Tue Jun 03, 2014 2:22 pm

Reduce the funds to 4:
Total Stock Market (all cap US)
Total International Stock Market (all country all cap ex-US)
Government securities (no change to existing G Fund)
Corporate Bond Fund (intermediate term corporate only bond fund)

Increase withdrawal options to current industry standards.

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Re: Improving the TSP [for current participants]

Post by rkhusky » Tue Jun 03, 2014 2:25 pm

MnD wrote:Reduce the funds to 4:
Total Stock Market (all cap US)
Total International Stock Market (all country all cap ex-US)
Government securities (no change to existing G Fund)
Corporate Bond Fund (intermediate term corporate only bond fund)

Increase withdrawal options to current industry standards.


Looks good to me. Although I would also keep the Lifecycle funds as they are beneficial to a large swath of the population.

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Re: Improving the TSP [for current participants]

Post by MnD » Tue Jun 03, 2014 2:34 pm

rkhusky wrote:
MnD wrote:Reduce the funds to 4:
Total Stock Market (all cap US)
Total International Stock Market (all country all cap ex-US)
Government securities (no change to existing G Fund)
Corporate Bond Fund (intermediate term corporate only bond fund)

Increase withdrawal options to current industry standards.


Looks good to me. Although I would also keep the Lifecycle funds as they are beneficial to a large swath of the population.


oops - forgot about those.
Yes, keep them as professionally managed blends of the above funds.

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Re: Improving the TSP [for current participants]

Post by JVT » Wed Jun 04, 2014 5:00 pm

MichDad wrote:I've been investing into the TSP since 1987 and my account balance far exceeds $1 million. While I continue to believe that the TSP is a wonderful investment vehicle, I think it can be improved significantly in several respects. I've been considering this and have come up with five things the Federal Retirement Thrift Investment Board could do to improve the TSP. It is my hope that others can contribute to this list by adding items or by critiquing my suggestions. Once I have a vetted list, I plan on writing to the FRTIB requesting that they consider my suggestions. I thank you in advance for considering my suggestions. Here they are:

1. Allow in-plan conversions from the regular TSP to the Roth TSP.
2. Allow TSP account holders to invest their regular TSP contributions in different funds and in different percentages/amounts than in their Roth TSP.
3. Allow TSP account holders to withdraw their regular TSP and Roth TSP funds in different percentages/amounts. For example, if an account holder wants to keep his or her Roth TSP monies in the TSP longer than his or her regular TSP funds, this should be permitted. [I know that under current law, this suggestion cannot be applied to withdrawals resulting from Required Minimum Distributions.]
4. Allow TSP account holders to change their withdrawal options at least annually. For example, we should be permitted to take out different lump sum amounts anytime.
5. Modify the I fund so it will include Canadian equities and equities from emerging markets. If emerging market equities are not included in the I fund, there should be a new fund created (an E fund?) to encompass this sector.

MichDad


I support the first 4 points and agree with other respondents that changing the I-Fund to track a more inclusive index, I don't feel there is a strong need for a new fund and changing the index is more likely to happen. The following is the response I got from the TSP message center the last time I poked them about in plan conversions (early March).

TSP wrote:In fiscal year 2014, the TSP will conduct a study on the merits and methods of allowing in-plan Roth conversions as well as other changes associated with the Roth TSP feature (such as allowing participants to elect to withdraw traditional accounts and Roth accounts separately rather than pro rata as is currently required under TSP rules). Should the TSP elect to allow in-plan Roth conversions and/or other Roth-related changes, it will require significant reprogramming as well as significant changes to our communication materials. While this will not deter us, the TSP is charged with acting in the best interest of our participants and is always looking for ways to meet the needs of our participants; we likely will not be able to implement any such changes in the near future.


MichDad, if you send me a soft copy of the letter and address once you have it together I would be happy to send a similar one.

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Re: Improving the TSP [for current participants]

Post by MichDad » Thu Jun 05, 2014 8:21 am

I will draft a letter to the Chairman of the FRTIB incorporating most of the excellent suggestions provided by those who have contributed to this thread. I will share via private message the text of my draft with all who have expressed an interest in seeing it. It is my hope that if several of us send letters, we can effectuate TSP improvements.

Thank you again for your suggestions and comments.

All the best,

MichDad

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Re: Improving the TSP [for current participants]

Post by MichDad » Thu Jun 26, 2014 10:45 am

According to a memorandum from the FRTIB's Executive Director, Greg Long, addressing the proposed mutual fund window option and appended to the minutes of the Board's May 2014 meeting:

"From TSP distribution data, we know that 45% of participants that separated from service in 2012 removed all TSP funds and closed their account by the end of 2013. In 2013, these separations caused nearly $10 billion to leave the TSP. Almost 72% of that amount was transferred to another financial institution or employer plan."

That memo also reports that the FRTIB is designing a survey to reach participants who executed a post-separation full-withdrawal and they expect results by the fall of 2014.

Here's the source:

http://www.frtib.gov/pdf/minutes/MM-2014May-Att4.pdf The quote and survey summary I provided are both contained on page 7 of the memo.

MichDad

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Re: Improving the TSP [for current participants]

Post by baw703916 » Thu Jun 26, 2014 11:00 am

MichDad wrote:According to a memorandum from the FRTIB's Executive Director, Greg Long, addressing the proposed mutual fund window option and appended to the minutes of the Board's May 2014 meeting:

"From TSP distribution data, we know that 45% of participants that separated from service in 2012 removed all TSP funds and closed their account by the end of 2013.


:oops:

It simply is not possible to hit the same efficient frontier curve for a conservative portfolio w/o the G Fund.
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Re: Improving the TSP [for current participants]

Post by dharrythomas » Thu Jun 26, 2014 9:08 pm

If they want people to leave money in the TSP, they need to expand withdrawal options. My one partial withdrawal will be used for the Roth portion. I might as well transfer the traditional at the same time to avoid some of the restrictions.

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Re: Improving the TSP [for current participants]

Post by hoppy08520 » Thu Jun 26, 2014 9:23 pm

MichDad wrote:According to a memorandum from the FRTIB's Executive Director, Greg Long, addressing the proposed mutual fund window option and appended to the minutes of the Board's May 2014 meeting:

"From TSP distribution data, we know that 45% of participants that separated from service in 2012 removed all TSP funds and closed their account by the end of 2013. In 2013, these separations caused nearly $10 billion to leave the TSP. Almost 72% of that amount was transferred to another financial institution or employer plan."

For a little perspective, the TSP has $358 billion in AUM. Thus $10b withdrawn is less than 3%. Makes me think that the 45% of separated employees who liquidated their accounts were short-timers with small balances since this is a smallish amount of the TSP overall.

Still, it's not a good sign. I'm sure a lot of these folks multiplied their ER by a hundred or more by moving their account to a bank or other full service brokerage. These people surely aren't reading Bogleheads.

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Re: Improving the TSP [for current participants]

Post by gkaplan » Thu Jun 26, 2014 9:48 pm

hoppy08520 wrote:
MichDad wrote:According to a memorandum from the FRTIB's Executive Director, Greg Long, addressing the proposed mutual fund window option and appended to the minutes of the Board's May 2014 meeting:

"From TSP distribution data, we know that 45% of participants that separated from service in 2012 removed all TSP funds and closed their account by the end of 2013. In 2013, these separations caused nearly $10 billion to leave the TSP. Almost 72% of that amount was transferred to another financial institution or employer plan."

For a little perspective, the TSP has $358 billion in AUM. Thus $10b withdrawn is less than 3%. Makes me think that the 45% of separated employees who liquidated their accounts were short-timers with small balances since this is a smallish amount of the TSP overall.

Still, it's not a good sign. I'm sure a lot of these folks multiplied their ER by a hundred or more by moving their account to a bank or other full service brokerage. These people surely aren't reading Bogleheads.


I have a fairly large balance and plan to liquidate my account in the next several months, that is transfer my balance to Vanguard, because of the TSP's limited distribution options.
Gordon

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Re: Improving the TSP [for current participants]

Post by gtwhitegold » Thu Jun 26, 2014 11:56 pm

In regards to expanding the I Fund to be all countries excluding the US, I seriously doubt that that will happen. That has been brought up before the board on more than one occasion and was not recommended by the board. Also, it was not recommended to add Canada. Previous board minutes have mentioned that MSCI World (which includes Canada) is too correlated to the MSCI EAFE index to consider. Also, emerging markets are not liquid enough to consider adding (as per the board minutes.) Personally, I would recommend to the board that the I Fund have a transition phase to the MSCI World Index. Just inclued more Canadian Equities each month until it matches the amounts for MSCI World.

Your best bet now to have a more inclusive international index now is to support the mutual fund window option. That is still under review and would not be authorized until after 1 October since it is not being considered until after the new fiscal year. If it is approved, expect to have it implemented at the earliest, mid-2016.

As far as merging the C and S funds, why? If you want a total market fund, just set it to the appropriate percentages and rebalance on your normal percentage bands or schedule.

Personally, I would like a more flexable withdrawl schedule, the mutual fund window, and in plan conversions.

My current intentions are to convert enough to Roth each year to max the 15% tax bracket and take all withdrawls out of the Roth side. I also hope that if/when they implement the mutual fund window option that they use their size as an advantage. The TSP is large enough that high fees shouldn't even be considered. I personally do not want to pay more than 6 basis points in administrative costs and fees. Also, I think that the proposed 25% maximum allocated to the mutual fund window is too restrictive. I would recommend 50%.

Allen

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Re: Improving the TSP [for current participants]

Post by denovo » Fri Jun 27, 2014 10:18 am

gtwhitegold wrote:Also, emerging markets are not liquid enough to consider adding (as per the board minutes.)



I am very skeptical of this, then how do umpteen index funds with emerging markets , including Vanguard's successfully operate with low spreads.
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Re: Improving the TSP [for current participants]

Post by MichDad » Sun Aug 17, 2014 9:38 am

As promised several weeks ago, I sent a letter to the Chairman of the Federal Retirement Thrift Investment Board suggesting several ways to improve the TSP. I have received a response from Thomas K. Emswiler, Director, Participant Operations and Policy. Here is a summary of what Director Emswiler has written:

First, the staff of the FRTIB is currently conducting a study of the concepts of allowing TSP participants to convert regular TSP funds to Roth TSP funds; to allow TSP participants to invest their regular and Roth TSP funds in different percentages/amounts; and to allow TSP participants to withdraw their regular and Roth TSP funds in different percentages/amounts. Their target date for completing the study is December 31, 2014. While that date is not far off, the FRTIB will have to review the recommendations and, if accepted, it will have to implement them. Director Emswiler did not provide any further timeline information.

Second, the staff of the FRTIB is conducting a study of the concept of allowing separated participants to make at least annual lump sum withdrawals or rollovers. Their target for completing that study is March 31, 2015. Director Emswiler cautioned that even if the FRTIB decides to move forward with these improvements, Congress would have to enact implementing legislation and that process could be lengthy.

Third, I had suggested that the FRTIB (a) fold the S Fund into the C Fund; and (b) expand the coverage of the I Fund to include Canadian equities, small capitalization international companies, and emerging markets. Director Emswiler wrote that the FRTIB had commissioned a study by Hewitt EnnisKnupp. The consultants recommended no changes to the C Fund and recommended expanding the I Fund to include Canadian companies. Director Emswiler's letter did not report the consultants' findings with respect to increasing the coverage of the I Fund to include small cap international companies and emerging markets.

If TSP participants continue to express their desire to improve the TSP, I believe we will have a positive impact.

All the best,

MichDad

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Re: Improving the TSP [for current participants]

Post by FedGuy » Sun Aug 17, 2014 12:45 pm

MichDad,

Thank you very much for bringing your suggestions to the TSP, and for updating us on the response.

TDAlmighty
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Re: Improving the TSP [for current participants]

Post by TDAlmighty » Sun Aug 17, 2014 4:18 pm

Thank you MichDad! I am confident that the TSP board will continue to make changes for the better--though it tends to happen a little slower than some of us would like...

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VictoriaF
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Re: Improving the TSP [for current participants]

Post by VictoriaF » Sun Aug 17, 2014 4:53 pm

After corresponding with MichDad via PM, I sent a letter to the TSP Board requesting (1) In-Plan Roth conversions and (2) Annual withdrawals. While I was on holiday, I received a letter with a response as follows:

Thomas K. Emswiler, Director, Participant Operations and Policy wrote:1. Allow In-Plan Conversions. This proposal is already under serious consideration at the TSP. A member of my staff is leading a team to determine what system, communication, and related changes would be necessary to allow in-plan conversions. Barring serious, unforeseen obstacles, I expect we will go forward and allow in-plan, Roth conversions. Our target for completing this study is December 31, 2014.

2. Allow retired or separated participants to make at least annual lump sum withdrawals or rollovers. Another member of my staff is leading a team to determine whether the TSP's current withdrawal options are adequate to meet the needs of our participants. Allowing additional lump sum, partial withdrawals or rollovers is a significant component of this study. Our target for completing this study is March 31, 2015. However, Congress, in law, has provided the TSP's withdrawal options. Assuming the study group recommends adding new withdrawal options, Congress will need to enact a law to permit it. While Congress is generally receptive to recommendations to enhance the TSP, the process can, on occasion, be lengthy.


This is consistent with the response received by MichDad. Still, I think it's helpful for the TSP Board to receive similar requests from multiple participants.

As far as I am concerned, if I can do in-plan Roth conversions, I will keep the funds in the TSP G-Fund indefinitely, and limited distribution options will become much less of a problem.

Victoria
Last edited by VictoriaF on Sun Aug 17, 2014 5:03 pm, edited 1 time in total.
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

TDAlmighty
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Re: Improving the TSP [for current participants]

Post by TDAlmighty » Sun Aug 17, 2014 5:03 pm

Thanks Victoria! :sharebeer

rkhusky
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Re: Improving the TSP [for current participants]

Post by rkhusky » Fri Sep 19, 2014 10:04 am

VictoriaF wrote:As far as I am concerned, if I can do in-plan Roth conversions, I will keep the funds in the TSP G-Fund indefinitely, and limited distribution options will become much less of a problem.
Victoria


The TSP requires RMD's from Roth accounts, so you can't keep all your TSP G-Fund indefinitely.

CUBuffs
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Re: Improving the TSP [for current participants]

Post by CUBuffs » Fri Sep 19, 2014 10:35 am

Thanks MichDad and Victoria for all your efforts to improve the TSP! I especially like the suggestion to allow annual lump sum withdrawals. As Grabiner and others pointed out in another thread, this would essentially allow us to withdraw from specific funds by making a withdrawal and immediately rebalancing.
Best wishes,
Mike

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VictoriaF
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Re: Improving the TSP [for current participants]

Post by VictoriaF » Sat Sep 20, 2014 11:28 am

rkhusky wrote:
VictoriaF wrote:As far as I am concerned, if I can do in-plan Roth conversions, I will keep the funds in the TSP G-Fund indefinitely, and limited distribution options will become much less of a problem.
Victoria


The TSP requires RMD's from Roth accounts, so you can't keep all your TSP G-Fund indefinitely.


For as long as I live indefinitely, I will have some money remaining in the TSP G-Fund indefinitely. If I die, it will become someone else's problem.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

MichDad
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Re: Improving the TSP [for current participants]

Post by MichDad » Fri Oct 31, 2014 6:16 pm

This is from the minutes of the Federal Retirement Thrift Investment Board's September 29, 2014 minutes:

"Ms. Wilder presented early findings from a survey of participants taking withdrawals from the TSP. The survey found that motives for withdrawal included expenditures such as mortgages, household expenses, medical expenses, repaying debt, and significant life events such as births, weddings, and education. One fourth to one third of participants withdrew funds from the plan because they wanted withdrawal options that the TSP does not currently provide. Other motives included a desire for additional investment options such as mutual funds and access to stocks and bonds. Twenty three percent of respondents cited a desire for greater Roth allocation flexibility and fifteen to twenty three percent of respondents cited a desire for a financial advisor or financial advice. Neither service nor costs were cited as a reason for leaving the plan. The survey findings will inform later Agency programming decisions that will aim to provide greater flexibility and guidance to participants.

Mr. Jasien asked whether the survey included any participants who remained in the plan after retiring. Ms. Wilder responded that participants who made partial withdrawals remained in the program and were included in the survey. Chairman Kennedy asked whether a final report would be forthcoming, and Mr. Long replied that it would be available at the November meeting. Mr. McCray applauded the team for taking steps to learn from participants who made withdrawals."

http://www.frtib.gov/MeetingMinutes/2014/2014Sep.pdf

MichDad

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VictoriaF
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Re: Improving the TSP [for current participants]

Post by VictoriaF » Mon Nov 03, 2014 6:35 pm

MichDad,

Thank you very much for the updates,

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

CUBuffs
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Re: Improving the TSP [for current participants]

Post by CUBuffs » Mon Nov 03, 2014 7:27 pm

Thanks MichDad,
I appreciate the update and your continued efforts to improve the TSP withdrawal options.
Mike

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Re: Improving the TSP [for current participants]

Post by MichDad » Thu Dec 18, 2014 11:23 am

At its November 2014 meeting, the FRTIB approved a mutual fund window ("MFW") concept for the TSP. Here are links to: (1) the FRTIB's minutes on this topic (see item 5.b.); (2) the memo from the TSP's Executive Director recommending a MFW; and (3) his accompanying PowerPoint presentation.

http://www.frtib.gov/MeetingMinutes/2014/2014Nov.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att8.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att9.pdf

Personally, I don't think we need a MFW for the TSP. The FRTIB can do several other things to better improve the TSP.

MichDad

EDIT: I've slightly edited the last sentence by breaking it up into two separate sentences for clarity.
Last edited by MichDad on Thu Dec 18, 2014 12:49 pm, edited 1 time in total.

gkaplan
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Re: Improving the TSP [for current participants]

Post by gkaplan » Thu Dec 18, 2014 12:07 pm

MichDad wrote:At its November 2014 meeting, the FRTIB approved a mutual fund window ("MFW") concept for the TSP. Here are links to: (1) the FRTIB's minutes on this topic (see item 5.b.); (2) the memo from the TSP's Executive Director recommending a MFW; and (3) his accompanying PowerPoint presentation.

http://www.frtib.gov/MeetingMinutes/2014/2014Nov.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att8.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att9.pdf

Personally, I don't think we need a MFW for the TSP and that the FRTIB can do several other things to better improve the TSP.

MichDad


Like improve the full withdrawal options for taking RMDs.
Gordon

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hoppy08520
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Re: Improving the TSP [for current participants]

Post by hoppy08520 » Thu Dec 18, 2014 1:21 pm

MichDad wrote:At its November 2014 meeting, the FRTIB approved a mutual fund window ("MFW") concept for the TSP. Here are links to: (1) the FRTIB's minutes on this topic (see item 5.b.); (2) the memo from the TSP's Executive Director recommending a MFW; and (3) his accompanying PowerPoint presentation.

http://www.frtib.gov/MeetingMinutes/2014/2014Nov.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att8.pdf
http://www.frtib.gov/pdf/minutes/MM-2014Nov-Att9.pdf

A few more articles on this:

TSP moves toward opening new investment ‘window’ - The Washington Post

Your TSP Investment: Where’s the Money Going and Why Do ‘They’ Care? : FedSmith.com

MichDad wrote:Personally, I don't think we need a MFW for the TSP and that the FRTIB can do several other things to better improve the TSP.

MichDad, I'm with you. It may be paternalistic but I think the TSP would be better off to improve the I Fund, and perhaps offer a few additional funds, than open up a self-directed brokerage window.

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Re: Improving the TSP [for current participants]

Post by MichDad » Thu Dec 18, 2014 3:42 pm

hoppy08520 wrote: MichDad, I'm with you. It may be paternalistic but I think the TSP would be better off to improve the I Fund, and perhaps offer a few additional funds, than open up a self-directed brokerage window.


Hoppy, while I agree that improving the I Fund would be a worthwhile improvement, for me even more important improvements would be such things as: (1) allowing within-plan Roth conversions; (2) allowing participants to hold and withdraw regular and Roth TSP investments in different percentages; and (3) liberalizing the number and frequency of post-separation withdrawals, at least after participants reach their full FERS or CSRS retirement age.

It seems painfully obvious to me, at least, that many TSP participants might want to hold and withdraw their regular and Roth TSP investments in different percentages. Most of those participating on this forum would agree that, as a general matter, regular TSP and regular 401(k) holdings should be drawn upon before Roth TSP and Roth 401(k) holdings. [Yes, I know there are exceptions.] Similarly, most of those participating on this forum would further agree that assets to be held for longer time frames may (even should) be tilted more towards equities than assets to be held for shorter time frames. These two points should result in the FRTIB allowing TSP participants to hold and withdraw their regular TSP holdings in different percentages than their Roth TSP holdings.

And in anticipation of a comment on this, I am well aware that under present law, Roth TSP and Roth 401(k) holdings are subject to RMDs beginning at age 70.5. This fact should not preclude TSP account holders from further tilting their Roth TSP holdings towards equities. If this remains the law when I turn 70.5 years old, I would like the option of moving only my Roth TSP balance over to Vanguard or another low cost brokerage and keep my regular TSP invested with the TSP.

MichDad

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hoppy08520
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Re: Improving the TSP [for current participants]

Post by hoppy08520 » Thu Dec 18, 2014 5:34 pm

MichDad, I'm with you on all those other things too. My earlier comment was really just about fund options, not necessarily about account management. Let's cross our fingers...

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Re: Improving the TSP [for current participants]

Post by PoppyA » Thu Dec 18, 2014 6:09 pm

Late to the discussion. I wish for a Stop-Loss option. Perhaps a roll over to the G fund when things slide south.
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OutInThirteen
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Re: Improving the TSP [for current participants]

Post by OutInThirteen » Fri Dec 19, 2014 1:46 am

To me, the best improvement would be to allow more flexibility in withdrawals.

MichDad
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Re: Improving the TSP [for current participants]

Post by MichDad » Fri Dec 19, 2014 9:13 am

PoppyA wrote:Late to the discussion. I wish for a Stop-Loss option. Perhaps a roll over to the G fund when things slide south.


That's a very interesting idea that I never thought of before. Thank you for suggesting it. I wonder whether anyone has ever suggested it to the FRTIB before. I've never seen it discussed in their monthly minutes.

MichDad

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Re: Improving the TSP [for current participants]

Post by trueblueky » Fri Dec 19, 2014 11:08 am

texasdiver wrote:I'm frankly glad they didn't "improve" it by doing all the things my cohort of younger workers wanted to see happen back in the late 90s during the tech bubble when we Federal workers were chafing at seeing our funds locked into the boring TSP when friends in the private sector were investing their 401(k) funds in high flying tech funds from places like Janus.....Yikes!

The older I get and the more I learn the happier I am with the TSP. It's like how your parents are idiots when you are 16 and somehow manage to get a whole lot smarter by the time you hit 30.

+1
I would like to be able to take an annual lump sum that I can vary. I know I can set up monthly withdrawals each year that's different each year, but a single lump sum would be more convenient.

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