TSP Board Wants Plan Changes

December 1, 2005 (PLANSPONSOR.com) - Board members and staff for the federal employees' Thrift Savings Plan (TSP) want plan changes approved by Congress, but fear unwelcome additions.

Govexec.com reports that Gary Amelio, executive director of the TSP, wants Congress to pass four legislative initiatives that would place limits on loans, automatically enroll new hires, change the default fund, and revise fund definitions.

Amelio and the board are concerned, though, that if Congress endorses these changes, it might at the same time approve other proposals to add funds to the TSP. The unwelcome additions could include funds that invest in real estate or precious commodities, and socially conscious funds that, for example, do not invest in Sudan, according to govexec.com. Amelio and TSP Board Chairman Andrew Saul have said funds should not be added due to political considerations, including pressure from real estate interests or humanitarian concerns.

Amelio said he would like to limit participants to one outstanding loan from their TSP fund. Currently, the plan allows one general purpose loan and one residential loan for each participant to be outstanding at the same time. Amelio fears that the Board’s proposal will be seen by Congress as taking away a benefit for government employees, but he argues that multiple loans are not in the best interest of participants because such loans hamper the TSP’s growth potential.

In addition, Amelio and the Board want employees to be automatically enrolled in the TSP upon hire, with a certain automatic deferral percentage, and the choice to opt out. They also want the lifecycle (L) fund to be the default fund for the plan – currently, the government securities (G) fund is the default fund. Finally, the board says Congress needs to correct a technicality as well, by revising the definitions of the common stock (C) fund and the small- and mid-sized companies (S) fund in the law to clarify the difference between the two.