TSP

The Federal Retirement Thrift Investment Board (FRTIB) has done a decent job of running the TSP and gradually rolling out changes over time – for example, upcoming withdrawal limit changes that the board has until November of 2019 to implement.

However, the Thrift Board isn’t the only one that wants to see certain changes. Consider recent legislation proposed by Sen. Jeff Merkley, D-OR, The Retirement Investments for a Sustainable Economy Act (S. 3424), that would establish a TSP fund stock option does not invest in fossil fuel companies (a type of socially responsible or “green” investment option).

As it stood on December 31, 2017, the last data available in the “Fund Sheets” on the TSP website, all three stock funds had fossil fuel companies in their mix. In fact, Exxon-Mobil is one of the top-ten stocks in the C Fund, while Royal Dutch Shell and British Petroleum are in the top ten in the I Fund.

The Thrift Board will, at some point in the future, be offering a “mutual fund window” that will allow TSP participants to invest a portion of their TSP in outside mutual funds. Presumably this window will allow TSP investors wide discretion in the type of funds in which they can invest – and that could potentially include so-called green mutual funds.

Another proposal included in House Republican budget plans this year would reduce the rate of return of the TSP G Fund. That was included along with a raft of benefits cuts that are likely to be shelved for a while following the midterm elections, which flipped the House.

The G Fund pays interest roughly equal to the rate of mid-term government bonds, but carries none of the risk (to loss of principal – which is statutorily protected) if interest rates go up. Backers of a change to lower the rate have long viewed it as a source of funding since lowering the rate would free up cash for other priorities.

Said the House’s budget bill passed last year, “those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security,” which is true – and why it’s a good deal for feds.