An interim rule of the Thrift Savings Plan went into effect yesterday, limiting the number of inter-fund transfers that postal and federal employees and retirees may carry out during the course of a year -- a move designed to deter plan participants from aggressively playing the market through their plan accounts.
The restrictions will be officially announced in the annual TSP participant statement mailing which is scheduled for February 2008. The TSP says it expects the rule to take permanent effect in April 2008.
In explaining the move, the TSP announced, "In recent months, it has become clear that a relatively small number of Thrift Savings Plan (TSP) investors (less than 3,000 of our 3.8 million participants) are engaging in excessive frequent trading. Because this activity is clearly accelerating, and in light of the detrimental effect on fund performance and transaction costs, at its November 2007 meeting, the members of the Federal Retirement Thrift Investment Board authorized the Executive Director to put in place restrictions on interfund transfers."
(Steve Barr provides an excellent overview of the recent changes and the current state of the TSP in today's Federal Diary column.)
According to Fedsmith.com, the TSP's new rule "will restrict TSP participants to only two interfund transfers (account rebalancings) per calendar month but would also allow subsequent unlimited interfund transfers into the very safe and conservative G Fund.
The interim regulation gives the TSP Executive Director the right to request that the frequent traders stop their trading practices right away. And, if they don't, the TSP will restrict the frequent traders to having to request transferring money between funds by using regular mail service."
Regular mail service, huh? That's one more creative way to increase USPS mail volume!
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