The TSP has taken one of the final actions toward opening its investment window in early June, finalizing rules to allowing account holders to—within limits—steer some of their investments to outside mutual funds for the first time in the program’s history.
A notice in Tuesday’s (May 10) Federal Register comes as the program has already started taking steps toward transitioning accounts to a new record-keeping system that will allow for investing through the mutual fund window as well as offering some new online features, an app, and new security features. The most significant of those will be to suspend access to certain transactions effective May 26 through the launch of the new system on an early-June date that still has not been specified.
The notice reiterates key features announced earlier, including a $55 annual administrative fee of $55, a $95 annual maintenance fee and a $28.75per trade fee for those who choose to use the window; a minimum initial transfer of $10,000 from an existing TSP account to be invested in that way; and a limit on investments through the window to no more than 25 percent of an account balance. The latter two taken together effectively mean the option will be available only to those with at least $40,000 on investment with the TSP.
The notice made few changes to draft rules released in January but specified, in response to questions and comments the TSP received, that:
* “Investment earnings that cause a mutual fund window account balance to exceed 25% of a participant’s total TSP balance will be permitted to remain in the mutual fund window account. However, a participant will not be permitted to transfer funds from the core funds to the mutual fund window if the participant’s mutual fund window account balance (including earnings) already exceeds the 25% restriction or if the transfer would cause the participant’s mutual fund window account balance (including earnings) to exceed the 25% restriction.”
* Investors with both traditional and Roth balances will not be required to set up separate investment window accounts. “A participant can transfer both traditional and Roth contributions into the same mutual fund window account.”
* “Trading within the mutual fund window will be restricted only by fees and rules that may be imposed by the mutual funds in which participants choose to invest.”
* The TSP will ensure that investors have access to any class of shares giving preferential treatment to institutional investors such as money managers. “We will not, however, evaluate or monitor any of the mutual funds to ensure that they are prudent investments,” it said.