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TSP Changes – The Mutual Fund Window & RMD Update

Posted By Dennis Damp On In BENEFITS / INSURANCE,ESTATE PLANNING,FINANCE / TIP,LIFESTYLE / TRAVEL,RETIREMENT CONCERNS,SURVIVOR INFORMATION | Comments Disabled
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Good news for those wanting more investment options. The TSP plans to add a mutual fund window as early as this summer. A welcomed addition from my perspective. The proposed rule [2] was posted on the Federal Register January 26, 2022. Comments must be received on or before March 28, 2022.

TSP Piggy Bank
 

Congress passed legislation in 2009 authorizing the Federal Retirement Thrift Investment Board (FRTIB) to offer a mutual fund window instead of adding more funds to the TSP’s mandated menu of core funds [3].

A mutual fund window is a self-directed brokerage account that gives individuals the ability to buy shares of mutual funds through a broker-dealer that has been selected by their retirement plan or by one of their retirement plan’s service providers. Unlike a plan’s core funds, the investments available through a brokerage account are not ordinarily vetted by a plan fiduciary to determine whether they are prudent investments. You must do your own research to determine the worthiness of your investment choices.

Those who choose to take advantage of the mutual fund window must transfer a minimum of $10,000 to fund purchases. However, the initial amount transferred cannot exceed 25 percent of the participant’s TSP balance. These two restrictions, taken together, would require a participant to have a minimum TSP balance of $40,000 before becoming eligible to invest through the mutual fund window.

Subsequent transfers to the mutual fund window can’t exceed 25 percent of a participant’s total TSP balance. If your TSP balance is $250,000, you can transfer a maximum of $62,500 to the mutual fund window.

Two interfund transfers are allowed in a calendar month. After that, money can only be transferred into the G Fund. Any transfer from the TSP core funds to a participant’s mutual fund window account, or vice versa, including a forced transfer, will count toward the existing monthly limit on interfund transfers. A member may always elect a fund transfer from his or her mutual fund window account to the G Fund.

A portion of the TSP’s administrative expenses will be allocated to those who choose to use the mutual fund window by charging an annual $55.00 fee. This fee will be redetermined once every three years and is in addition to any mutual fund window account maintenance fees, trading fees, and fees and expenses associated with the specific mutual fund(s) in which the participant chooses to invest.

There will be thousands of funds to choose from including Vanguard, Fidelity and others. Mutual fund performance can be reviewed at the fund’s family website. I use www.morningstar.com [4] which allows registered users to track investments and review detailed fund analysis; they also have an exceptional account X-ray feature. A 15-day free trail is available to check it out.

There may be changes to the program after comments are received. The TSP will send out an announcement prior to implementation.




RMD Update

TSP participants that are required to take an RMD this year received a notice specifying the amount they must withdraw to satisfy this requirement. I receive this letter every January.

Joe, a newsletter subscriber, noticed that the TSP used the old IRS Uniform Lifetime Tables to calculate the Required Minimum Distributions for 2022! He contacted the TSP and their response follows:

“This responds to your inquiry of January 15, 2022, concerning your Thrift Savings Plan (TSP) account. You stated your January 2022 installment payment was miscalculated.

We regret any inconvenience. Your January 2022 installment payment was calculated using the old Internal Revenue Service (IRS) Uniform Lifetime Table. The new IRS Uniform Lifetime Table has not yet been applied to the TSP’s payment system. We are in the process of updating this information in our systems. Payments calculated using the new table will begin as soon as possible. A notice containing the new calculation for your 2022 required minimum distribution (RMD) should be mailed to your address of record in February 2022.”

The revised notice should arrive shortly, or you can download a copy from the TSP website.

Helpful Retirement Planning Tools

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Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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