fedweek.com: TSP annuity inflation protection

The TSP has stressed that the savings from its new policy on inflation adjustments in annuity purchases will go to the account holder, and not to the TPS itself.

The TSP made that comment in finalizing rules on Tuesday (March 3) to carry out the change. For those newly purchasing annuities and adding the inflation protection option, the monthly payments will increase by 2 percent per year regardless of inflation. The prior policy—which remains in effect for annuities purchased previously—was to increase the annuity by up to 3 percent per year depending on an inflation index.


The TSP has said that because annuities have actually been increasing by only 2 percent per year on average, those who chose that option were paying for more protection than they were receiving—the reduction in the initial annuity was based on an assumption of 3 percent increases per year. The TSP said that the new policy will result in initial annuities 10 to 15 percent larger than comparable annuities bought under the prior policy.

In its final notice, the TSP said that several commenters on the proposed rules “expressed concern that a fixed rate of 2 percent would not provide adequate inflation protection for participants over the long term and was a cost-saving measure for FRTIB”—the Federal Retirement Thrift Investment Board, the TSP’s governing board.

Said the notice: “As noted in the preamble to the proposed rule, the FRTIB will regularly review the COLA to ensure that it continues to be beneficial for TSP participants. Moreover, all TSP assets are held in trust and any savings that result from the COLA change will be passed along to participants, not the FRTIB.”

The rules also finalized a policy in effect since the beginning of the year requiring two-factor authentication for those accessing their accounts at the TSP website.

TSP Revising Inflation Protection Feature in New Annuities

Understanding Inflation and the Thrift Savings Plan (3/19/2018)

TSP: Fastest Market Correction in History

TSP Investors Handbook, New 7th Edition