In a Congressional hearing on Tuesday, Representative Gerry Connolly (D-Virginia) said he found it “hard to understand why such a change would be advantageous for federal employees,” according to Govexec.com. American Federation of Government Employees (AFGE) representative J. David Cox expressed concerns that it wouldn’t be.
“We believe that in almost every case, federal employees who would choose to utilize this mutual fund window would lower their overall rate of return on their savings, not only by exposing themselves to unnecessary risk, but also by paying the large fees and load charges that mutual funds impose on investors,” said Cox, according to the news report. The law requires anyone who uses the mutual fund option to pay for its implementation so no one else is subject to the fee.
Meanwhile, a National Treasury Employee Union (NTEU) said the NTEU thinks it’s a good idea, but also noted the risk to TSP enrollees. Representative Stephen Lynch (D-Massachusetts), chairman of the House Oversight and Government Reform subcommittee on the federal workforce, said he was not only concerned about participants investing through the window, but about retirees being bombarded with marketing info by companies seeking profit.
TSP Executive Director Greg Long defended the mutual fund window option as a way to meet the demands of a small group of participants without changing the overall nature of the TSP. “There are a small number of participants who will always say, ‘We should have a gold fund, a real estate fund, a socially conscious fund.’ There’s an unending list of ‘whatever’ funds, fill in the blank,” Long said.
He noted that he had no plans to implement it until the ETAC and FRTIB agreed to the plan.
The 2009 Family Smoking Prevention and Tobacco Control Act includes the provision allowing the TSP to create a mutual fund window that would allow participants to direct their TSP funds to private-sector mutual funds (see Tobacco Bill Brings TSP Changes ).
« Loans and Hardships: Testing One's Patience in the New 403(b) World