There are TSP 'open seasons’--and then there’s this TSP 'open season.’

    As part of the Thrift Savings Plan (TSP) 'open season,’ or 'open enrollment’ period that began on May 15 and lasts until July 31, three new changes have been initiated in that federal investment program. They were highlighted in the Statement of Earnings and Leave which USDA employees received for Pay Period No. 6.

    According to Eleanor Ratcliff, USDA’s benefits officer in the Office of Human Resources Management, the first change concerns a one percent increase in the maximum amount of contributions which employees enrolled in either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS) can contribute to their federal retirement programs, respectively, through TSP.

    “Employees covered under CSRS can now elect to contribute, to the Thrift Savings Plan, up to 6 percent of the base pay they earn each pay period, while employees covered under FERS can now elect to contribute to TSP up to 11 percent of their base pay,” she explained. Contribution limits will then increase by one percentage point each year, for each retirement plan, through the year 2005. By that time, the maximum contribution level for CSRS enrollees will be 10 percent of base pay to TSP, and for FERS enrollees will be 15 percent of base pay to TSP.

    "Then, in 2006, those employee contribution limits are lifted entirely, for both retirement plans,” Ratcliff noted.

     “At that point, the only restriction in effect will be the Internal Revenue Service’s annual limit, or cap, on employee contributions to the Thrift Savings Plan,” she said. “It’s called the 'IRS elective deferral limit’, and it’s currently set at $10,500 per year for either retirement plan.”

    The second change being offered to employees during this TSP 'open season’ is the addition of two new investment funds.

    Ratcliff pointed out that, heretofore, employees had only three TSP investment funds to choose from: the Government Securities Investment Fund, or “G Fund,” which invests in short-term, risk-free U.S. Treasury securities that are specially issued to the TSP; the Fixed Income Index Investment Fund, or “F Fund,” which invests in a bond index fund that tracks the Lehman Brothers U.S. Aggregate (LBA) bond index; and the Common Stock Index Investment Fund, or “C Fund,” which invests in a stock index fund that tracks the Standard & Poor’s (S&P) 500 stock index.

    “But now,” she affirmed, “employees have the option of investing in two new funds that are stock-based: the 'S’ and 'I’ Funds.”

    The Small Capitalization Stock Index Fund, or “S Fund,” covers medium and small company stocks that are excluded from the C Fund. Specifically, it tracks the Wilshire 4500 stock index of publicly traded U.S. companies that are not in the S&P 500 index that the C Fund tracks.

    The International Stock Index Investment Fund, or “I Fund,” is TSP’s international stock index fund. Specifically, it tracks the Morgan Stanley Capital International EAFE (Europe, 'Australasia,’ and the Far East) stock index, an index that tracks the overall performance of major companies and industries in the European, Australian, and Asian stock markets. It then invests in shares of the Barclays EAFE Index Fund.

    "The stock indexes, that these two new funds are tracking, have posted impressive gains in many recent years--but they’ve also traditionally been much more volatile,” she observed. “So whatever can go up can go down--pretty fast.”

    The third change during this TSP open season is that new CSRS and FERS employees may participate immediately in TSP.

    “With this change, employees who are new to the federal government--almost always employees who are covered by FERS--and those who leave federal service but who later return--which may include CSRS employees--may now begin participating in the Thrift Savings Plan immediately,” Ratcliff said. “In the past they would have been subject to waiting periods that could last nearly a year.”

    However, she noted that this change does not alter the waiting periods that the federal government uses to begin its automatic and matching contributions for FERS investors in TSP. “There is generally a wait of six to 12 months before those automatic and matching contributions take effect,” she said.

    “I see this as a great opportunity for employees to invest more in TSP,” Ratcliff underscored. “In fact, I submitted my change right off the bat.”