FERS Employees Could Hit TSP Investment Limit Soon, Miss Matching Contributions

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This point of the year is a good time for FERS employees who invest in the TSP at high rates to make sure they won’t lose government contributions to their accounts due to hitting the annual investment dollar limit too early.

The standard “elective deferral” limit this year is $22,500 (a combined limit for both traditional pre-tax TSP investing and after-tax Roth investing, for those making both types). For those age 50 or older—or who will turn 50 by year’s end—an additional $7,500 in “catch-up contributions” is allowed.

FERS investors should take care to structure their investments so that they can continue investing at least 5 percent of salary, the amount that produces the maximum government contribution, through every pay period of the year. Some employees invest at high rates early in the year in order to get money in the TSP sooner and take advantage of potential tax-advantaged growth for longer periods—that is, “front-loading” their investments.

Especially those FERS employees who have been doing so might want to examine their situation around now.

If FERS investors hit the dollar cap before the last pay period of the year, their own investments will shut off until next year and so will government matching contributions worth up to 4 percent of salary (although the automatic 1 percent of salary government contribution would continue). Once lost, matching contributions can’t be recouped. To prevent that from happening, investors might need to make a new investment allocation.

They might wish to discuss the situation with their payroll offices, to determine how many pay distribution dates (not pay period ending dates, which are different) will remain in the year by the time they make a change, in order to set up their TSP withholding to their best benefit.

There is no similar consideration for CSRS investors, who get no government contributions.

Citation: FEDweek Published: August 15, 2023

 

 

Should I Stay or Should I Go? 14 Points to Consider Before Moving Money from TSP

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These are pros and cons of moving money from the TSP after retirement.

“Should I Stay or Should I Go?” by The Clash. if you bopped to this song in high school or college, you are most likely in sight of retirement so this is an important topic. But, even if you know this from jeans or hotel commercials, this is worth a read.

In their wisdom, the Clash sang, “If I leave there will be trouble… If I stay there will be double.” Not a bad metaphor for making the stay-or-go TSP (Thrift Savings Plan) decision. But like so many things, the devil is in the details.

At the outset, I need to give a shout-out to Ian Smith from FedSmith. A few months back I asked him what big question his readers had, and this topic was the #1 answer.

I want to be clear, my goal in this article is NOT to give advice on your individual decision to transfer out of TSP or to leave your funds there. Rather, I hope to offer a list of unvarnished insights from my experience and research to help you cut through the noise. Further, to do it justice this will be an article series.

This initial article will be a summary of points to consider, and my follow-ups will provide a deeper dive. In the next installment, I will cover the “Stays”, i.e. advantages, of TSP that support the possibility of staying. I will then follow up with “Goes”, i.e. reasons, to leave. Finally, I will give you the “planners perspective”. At STWS, we have over 80 combined years serving Feds so I will share those earned insights with you. Click HERE to read more.

 

GSA Proposes Rules on Sustainable Procurement

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The rules would reorganize the FAR to consolidate certain requirements for federal facilities.

The GSA has proposed rules to carry out a requirement for agencies to procure sustainable products and services “to the maximum extent practicable” as required by a late-2021 executive order.

Proposed rules in the August 3 Federal Register for a 60-day comment period note that the order “directs agencies to reduce emissions, promote environmental stewardship, support resilient supply chains, drive innovation, incentivize markets for sustainable products and services, purchase sustainable products and services in accordance with relevant statutory requirements, and, to the maximum extent practicable, purchase sustainable products and services identified or recommended by the Environmental Protection Agency.”

Follow-up guidance from OMB and the Council on Environmental Quality addressed issues including the types of products and services that meet those standards, circumstances in which it would be considered not practical to procure them, and requirements for federal facilities such as pollution reduction goals, it notes.

The proposed changes to the Federal Acquisition Regulation primarily: address policy and procedures for purchasing and prioritizing sustainable products and services, including requirements for agency programs and exceptions; and update requirements related to acquisition planning, special requirements for paper, waste reduction, construction and architect-engineer contracts and IT contracts.

They also would reorganize the FAR to consolidate requirements for federal facilities, purchasing programs and hazardous materials.

Source: FEDweek Published: August 7, 2023

 

Trio of TSP Funds Up Over 15% in 2023 

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Stock market’s continued momentum in July helps the federal government Thrift Savings Plan’s C Fund rise 20.62% through the first seven months of the year 

Three of the five main funds in the federal government’s 401(k)-like Thrift Savings Plan have gained more than 15% so far in 2023, with a strong stock market so far this year leading the TSP’s C Fund (common stocks) to a gain of 20.62% after increasing by 3.21% during the month of July. 

The C Fund is once again the largest TSP fund, replacing the conservative G Fund, which saw big increases in participant allocations during January-October 2022’s bear market. 

As reported by Government Executive, the small- and mid-size businesses of the S Fund saw the best TSP performance in July, finishing the month 5.91% in the black. Since January, the S Fund has grown 19.30%. 

Rounding out the trio of top performing funds in the world’s largest defined contribution plan, the I Fund (composed of international stocks) increased 2.82% last month, bringing its increase for the year to 15.32%. 

July was of course another strong month for the stock market, with the S&P 500 up 3.1% for the month and the Dow Jones Industrial Average up 3.3%. Through the first seven months of the year, the S&P 500 has risen more than 19% while the Dow added more than 7%. Meanwhile, the tech-heavy Nasdaq Composite has risen an amazing 44% from the start of the year through July. 

The G Fund, made up of government securities, grew by its statutorily mandated rate of 0.34% last month and has increased by 2.26% since January. 

The only TSP fund to lose value in July was the F Fund (fixed income), which declined 0.07% and slightly dinged its year-to-date return to 2.18%. 

Each of the TSP’s L (lifecycle) funds, which resemble target-date funds, posted gains in July. The L Income Fund, designed for those already making withdrawals, increased 1.09% (6.19% YTD); L 2025, 1.44% (8.28% YTD); L 2030, 2.18% (11.98% YTD); L 2035, 2.36% (12.95% YTD); L 2040, 2.54% (13.92% YTD); L 2045, 2.70% (14.75% YTD); L 2050, 2.86% (15.59% YTD); L 2055, 3.42% (18.52% YTD); L 2060, 3.42% (18.52% YTD); and L 2065, 3.42% (18.52% YTD). 

At the end of June 2023, total assets in the TSP were $796 billion, compared to just under $726 billion at the end of December 2022. 

Citation: 401K Specialist 

Brian Anderson, Editor-in-Chief 

August 3, 2023 

 

 

SENATE BLOCKS RUBIO AMENDMENT BANNING CHINESE INVESTMENTS FROM FEDERAL RETIREMENT PLAN 

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The Federal Retirement Thrift Investment Board (FRTIB) is steering retirement savings of military servicemembers and federal workers to funds that invest in Chinese companies, including companies that support the People’s Liberation Army.  

U.S. Senator Marco Rubio (R-FL) first raised the issue in 2019, leading a successful bipartisan effort to block the FRTIB from investing retirement savings in Chinese companies. In 2022, the FRTIB again opened the door to allow these funds to be invested in blacklisted Chinese companies.  

Despite bipartisan, majority support, including from Senators Jeanne Shaheen (D-NH), Joni Ernst (R-IA), and Dan Sullivan (R-AK), the Senate failed to adopt Rubio’s amendment to the annual defense bill that would have banned those investments. Click HERE to read more.