The TSP will open its investment window June 1, making investors—if they have at least $40,000 on investment and are okay with paying additional fees—eligible to steer up to 25 percent of their accounts into their choice of what will be some 5,000 mutual funds.
The setting of a specific date, announced Tuesday (May 24) at a meeting of the TSP board, was the last in a series of steps beginning with a 2009 law letting the TSP create a mutual fund investment window, the program’s formal commitment in 2015 to offering it, and preparations to make it a reality since then that had to await the launch of a new record-keeping system.
Restrictions on use of the window are to include a minimum initial transfer in of $10,000 and a limit of 25 percent of the person’s total account balance to be invested through the window—effectively making it available only to those with accounts above $40,000 (note: the 25 percent maximum would continue to apply for further investments through the window).
As a rough measure of that cutoff’s impact: as of the end of March TSP figures showed that only about 40 percent of all investors had accounts above $50,000. That includes accounts of military personnel, though, many of whom have been in the program for a relatively short time; the percentage of federal employees with accounts above the $40,000 level likely is substantially higher.
Investors using the window will be charged a $95 annual maintenance fee and a separate $55 annual fee—both designed to make sure that users pay the full cost of the window as the law requires—plus a $28.75 fee per trade.
The change is the latest step in a series of additional features to the TSP that in recent years have included a broadening of withdrawal options, in response to participant surveys showing a demand for more choice in managing accounts. The TSP also was motivated in part by data showing that restrictions on investments and withdrawals were a main reason that on retirement or separation for other reasons, many account holders transfer their money out of the program and into IRAs in search of more flexibility.
The TSP most recently added to its fund options in 2020, when it merged the lifecycle L target date fund for that year with the Income fund and started offering L funds in five-year increments rather than 10-year while adding funds beyond 2050, for 2055, 2060 and 2065. Before that, the most substantial changes were the addition of L funds in 2005 and the addition of the small company S fund and the international stock I fund in 2001.
Also effective June 1 will be a mobile app, a virtual assistant to be called AVA, and additional online services and security features.