Employees can change the amount of their investment at any time, but in practice many do not change the default amount. Image: Hyejin Kang/Shutterstock.com

The TSP has said that in the two years since it raised the default investment amount for newly hired federal employees the percentage of FERS investors receiving the maximum government match has risen from 79.3 to 85.4 percent.

Before that change, newly hired employees invested 3 percent of salary by default, capturing the dollar-for-dollar agency match up to that level. Since then, the default investment is 5 percent, which also captures the 50 cents-on-the-dollar match for percentages 4 and 5. Up to that time, the percentage of FERS investors capturing the maximum had been flat at around 79 percent for years.


Capturing the maximum matching amount is considered important for FERS employees since their basic civil service retirement benefit plus Social Security is smaller than the basic benefit alone for CSRS employees, who get no matching agency contributions.

Employees can change the amount of their investment at any time, but in practice many do not change the default amount. The same is true of the default designation, into the lifecycle L fund appropriate for their age on the assumption that they would begin withdrawals at age 62.

Data presented at the November meeting of the TSP board also showed that of the 2,733,000 FERS participants actively employed, including in the Postal Service, 138,000 (5 percent) are not personally investing. They receive only the automatic 1 percent of salary agency contribution for all FERS employees.

The data also showed that in October for the first time more than a third, 34 percent, of investors have their entire accounts in one or more of the L funds. Half of investors have some money in at least one of those funds, with the 2050 fund the largest by number of participants and the 2030 fund the largest in terms of assets. Those figures reflect all participants, including military personnel and those separated from federal or military service who have kept their accounts in place.

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