What’s in store for the Thrift Savings Plan in 2017? Events both external to the TSP (e.g., the change in administrations) and internal to the TSP (e.g., changes made by the Thrift Board) can have an effect on what happens to our TSP investments. This, of course, involves some speculation on my part, but I have never been afraid of sticking my neck out and making predictions (albeit, with the normal amount of disclaimers).
Starting with the easiest predictions, let’s look at changes that can be made by the Thrift Board itself. In past years they have let us know what changes they are thinking of; and some of those changes might occur in 2017. There are three major changes that the Thrift Board has said they are considering and we’ll look at them in the upcoming paragraphs.
The Thrift Board announced in July 2015 that they are planning on introducing a “mutual fund window” within the TSP. Once this window is introduced, participants will be able to invest part of their TSP money in outside mutual funds. The key word here is “outside”; the Thrift Board will not be allowing mutual funds within the TSP; rather, participants will be able to use some of their TSP money in outside investments. I do not believe that this will come to pass in 2017. A year and a half ago the Thrift Board estimated that it would take 19 months from the date a contract was awarded for this change to be implemented. I have not yet seen that a request for proposals (RFP) has even been issued, so it appears that this change won’t happen until 2018 at the earliest. Once we see what is included in an RFP, we will have a better idea of how the Thrift Board envisions the “mutual fund window” operating.
Also in July 2015, the Thrift Board announced that they will allow more flexibility in TSP withdrawals. Some of the items they said they were considering were: 1) allowing more changes in monthly payments; 2) offering more annuity options; and 3) allowing more “single payments”. As with the announcement of the mutual fund window, the TSP hasn’t announced any further progress on this front. A wild card as to whether these changes will happen in 2017 is whether there will need to be any enhancements made to the TSP’s computer system. If the system needs to be upgraded, I would not expect these changes to occur until 2018 at the earliest. I still remember the painfully slow upgrade of the system that was required before the L funds could be introduced over a decade ago.
In the TSP’s five-year strategic plan for 2017 through 2022, the Board stated that they would look into ways to do away with the proportionality requirement that affects TSP withdrawals. Unless the Thrift Board knows a way to easily change the Internal Revenue Code, the only way they can implement this change is by allowing participants to have two separate TSP accounts (Traditional and Roth) as opposed to the current set-up of having two separate balances within one account. This change would also be dependent on having a computer system that can handle any needed upgrades. If upgrades are needed, this change won’t occur this year.
I guess I have to advise you not to hold your breath in 2017 waiting for any internal TSP changes.