In April the Thrift Savings Plan will have been in existence for 30 years. As the TSP has grown older, it has also become more flexible; though it still lacks the flexibility of an Individual Retirement Arrangement (IRA).
The TSP began in April of 1987 with just one fund — the G Fund. In January of 1988, the C and F Funds were added to the mix of investments. We had to wait until May of 2001 to have more funds added; the S and I Funds were introduced at that time. The most recent change in available investments came in July 2005 when the L Funds were introduced. Though there have been no new funds added for almost twelve years, the TSP signaled its intention to allow plan participants to invest in outside mutual funds by means of a “Mutual Fund Window”. I suspect that this new expansion of investment choices will not come about for another few years, so don’t hold your breath.
When the TSP was introduced, and for many years thereafter, contributions were limited to 5% of salary for CSRS employees and 10% of salary for FERS employees. Today there is no percentage limit; individuals may contribute up to the IRS’ elective deferral amount (currently $18,000). Since the beginning, FERS employees have been eligible for government matching contributions, and CSRS employees have not.
Today’s employees, who can change their contribution allocations each pay period, have it better than early TSP participants who had to wait for one of the TSP’s two annual open seasons. Those open seasons were 2 1/2 months long!
Two unlimited interfund transfers can be made each month and are generally effective the next day if received before noon eastern time. Additional interfund transfers can be made if they are limited to moving money into the G Fund.
For most of the TSP’s life, employees had to opt in and could not immediately enroll. Earlier this decade, the Plan changed the rules so that all new employees were immediately enrolled in the TSP and had to opt out if they didn’t want to participate. Currently, almost 90% of federal employees participate in the Thrift Savings Plan.
Withdrawals from the TSP have gotten a little more flexible than they were in 1987, but have a long way to go before they match the flexibility of an IRA. Some employees remember the time when the amount of a monthly payment could never be changed; now they can be changed once a year in an open season. The Thrift Board hopes to liberalize the withdrawal options in the not too distant future.
So how have the various TSP funds performed over their lifetime? The G Fund has returned an average of 5.29% per year. The C Fund has returned an average of 10.07% per year. The F Fund has returned an average of 6.45% per year. The S Fund has returned an average of 8.32% per year. The I fund has returned an average of 4.23% per year. These figures are through 12/31/2015 — the most recent information available on the TSP website at the time this article was prepared. Keep in mind that the funds were introduced at different times, so beware of making comparisons.
In another 30 years, when the TSP turns 60, I predict that it will still be going strong and will offer more options and more flexibility than it does today