Benefits April 21, 2009

TSP Board Backs Roth Addition

April 21, 2009 (PLANSPONSOR.com) - The Federal Retirement Thrift Investment Board has formally backed the suggestion to give Thrift Savings Plan (TSP) participants a chance to invest in a Roth Individual Retirement Account.
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A news report on the govexec.com Web site said the board did not approve a move allowing the TSP to create additional investment funds.

According to the news report, board members also approved a provision to allow the spouses of deceased federal employees to continue managing their funds in the TSP instead of requiring them to withdraw those funds 60 days after their spouse passed away and reinvesting them elsewhere.

The board’s actions follow the April 2 U.S. House approval of legislation creating a Roth IRA account option for TSP participants and a mutual fund window in the plan (see House Passes Federal Retirement Reform Bill ). The govexec.com story said the U.S. Senate has yet to take up legislation on either issue, and neither chamber has introduced bills regarding spousal accounts.

Opponents claimed it would complicate the TSP needlessly and allow politics into the process. “This would totally, radically alter a plan that has been in place since 1986,” said board member Alejandro Sanchez.

TSP Executive Director Greg Long opposed broader investments because he said he did not want to encourage “intraday trading”, according to the report. As for the Roth IRA account option, Long predicted the plan would be a “game-changer” for younger government employees — especially those in the military.

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