Fedweek

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The TSP has projected that two to three percent of investors will use its mutual fund window, which launches today (June 1) after years of preparation by the former and years of anticipation by many of the latter.

The feature represents one of the most significant changes to the TSP since it began in the late 1980s and also represents a foray into uncharted territory. The TSP up to now has allowed investment only in the five core funds it offers itself plus lifecycle funds that contain various mixes of those core funds.

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“The 2-3% is our estimate of usage 2-3 years out. That’s based on our review of the usage of the MFW in other 401(k) plans that offer an MFW. However, it is only an estimate,” TSP spokeswoman Kim Weaver said.

Investors wishing to use it first will have to pass a bar of having at least $40,000 in their accounts. Reportedly, that will screen out more than 40 percent of federal employees and retirees with accounts and more than 80 percent of active and retired military personnel with accounts.

The $40,000 figure results from two restrictions on using the window: no outside investment can bring the total above 25 percent of the person’s total account balance, and the initial transfer in must be at least $10,000. Those requirements may give some investors pause, as may annual fees totaling $150 plus a $28.75 per-trade fee and the additional fees charged by the outside funds.

Investors using the window also will face the challenge—or opportunity, depending on point of view—of selecting from some 5,000 mutual funds that will become available. They will have access to a tool allowing them to screen funds by various criteria including investment philosophy, ratings and fees.

Also effective at the same time as the mutual fund window are new services and new security features on tsp.gov, which also will be available through a new mobile app.

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