John Grobe, Federal Career Experts
The Thrift Savings Plan has seen more changes in the last twelve months than it has in any other twelve-month period since its inception back in 1987. All of these changes have been dealt with in depth right here in FEDweek’s TSP Investment Report; this article is an overview of all that has happened in the “twelve months from hell” (or “twelve months from heaven” if you prefer). Just looking at the changes can make your head spin because there are so many of them. Some are specific to the TSP, while others apply to other employer-sponsored plans and even Individual Retirement Arrangements.
September 15, 2019 marked the implementation of the Thrift Savings Plan Modernization Act (TSPMA). This act brought the TSP into the 21st century by easing up on withdrawal restrictions that had hamstrung the TSP for years. Many people, including myself, took our money out of the TSP after we separated so that we could have something resembling flexibility in our withdrawal choices. I can state unequivocally that, had the TSPMA been in place several years earlier, I would still have a TSP account. The TSPMA changes affected all of those who had separated and all future separating participants.
January 1, 2020 marked the implementation of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. This primarily affected separated participants of a certain age. The major changes initiated by the SECURE Act were to change the age for required minimum distributions from 70 ½ to 72, and to do away with the option of a stretch IRA for almost all non-spousal beneficiaries. Someone who is already 72 and/or has his/her spouse as a beneficiary, will not be affected by these changes.
March 27, 2020 saw the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act. Temporary changes were made to rules on loans and withdrawals, including the payback of both, for those who were affected by the novel coronavirus. Minimum distributions are not required for 2020 as well.
July 1, 2020 saw a change in the TSP’s Lifecycle (L) Funds. The L 2020 Fund merged into the L Income Fund, and the lineup of available L Funds changed from ten-year intervals to five-year intervals.
Ongoing throughout the year has been a tug-of-war between the Thrift Board and certain members of Congress over the make-up of the International (I) Fund. The Thrift Board wanted to change the index tracked by the I Fund from the MSCI EAFE, which tracks developed foreign economies, to the MSCI All World, which tracks a broader group of economies. Some politicians objected because the All World Index contains China, the world’s second largest economy. At the time this article is being written, it looks like the politicians have won.
The full year milestone for when the TSPMA was implemented (i.e. 9/15/20) is still a couple of months away. Will there be more changes coming?
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