Fedweek

For the second straight month as the stock-oriented TSP funds suffered declines in October, investors overall shifted money from those funds to the never-losing government securities G fund.

On a net basis nearly $6.9 billion was moved into the G fund and another $310 million into the bond F fund, with the bulk coming from the common stock C fund and small company stock S fund, according to data released at the TSP’s monthly meeting for November. Total assets on investment with the TSP stood at $644 billion as of the end of October, down from $651 billion over the month.

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A similar shift, although on a lesser scale, also occurred in September as stocks suffered losses in that month, as well. Gains so far in November have more than overcome the combined losses of those two months.

That is essentially a repeat of the same pattern that played out on a larger scale earlier this year. During February and March as the stock funds suffered steep declines investors shifted about $24 billion on a net basis into the G fund. The stock markets recovered fairly quickly and in the following months, up to September, they had been moving money back into the stock funds on a net basis.

Meanwhile, the TSP has finalized rules on the new “spillover” policy to be effective in January regarding the additional investments allowed for employees age 50 or older. Under the “catch-up contribution” policy, they may make additional investments (of up to $6,500 in both 2020 and 2021) beyond the standard investment limit ($19,500 in both years).

Under the TSP’s traditional policy, which remains in effect through this year, a separate election to make those investments has been needed; effective next year, for those eligible, any investments above the standard limit be automatically designated as catch-up contributions, up to that limit.

In finalizing the rules, the TSP clarified the impact of back pay awards and other retroactive pay adjustments. It said that if an investor was age 50 or older during a year for which such an increase is attributable and had passed the standard limit, the excess will be treated as a catch-up contribution “even if the contributions are attributable to years before 2021. However, catch-up contributions attributable to years before 2021 are not eligible for matching.”

The TSP also announced that it has contracted with the Accenture firm to manage its record-keeping, call center operations and certain other services, as well as to provide planned new features such as an option to invest some TSP money in outside mutual funds which are not expected to be available until 2022.

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The G Fund is moderately positive, although due to low interest rates is not really keeping up with inflation. The F Fund was the better bond performer this year, as the bonds in that fund have a longer maturity profile and were able to gain some capital gains from the reduction in interest rates this year. Going forward, however, there are very low rates in this fund as well. The C and S Funds were next in line, as the top performers of all of the funds.

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