TSP Considers Restrictions on Inter-fund Transfers

Members of the Federal Employee Thrift Investment Board have authorized the TSP Executive Director to implement restrictions on inter-fund transfers as a result of what is being termed “excessive frequent trading” by a small number of TSP participants. According to the board, the excessive trading is driving up administrative costs of the plan and “having adverse effects on other participants.”

Before the restrictions are implemented, however, participants will be notified of the specific limitations that are being considered. In February, an explanation of the proposed restrictions will accompany the annual participant statements that are mailed to everyone who has a TSP account. Interested persons will have 30 days to comment following publication of the proposal in the Federal Register.

The following statement was recently posted on the TSP website: 

“In recent months, it has become clear that a relatively small number of Thrift Savings Plan (TSP) investors (less than 3,000 of our 3.9 million participants) are engaging in excessive frequent trading. Because this activity was 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.”

In the meantime, under the plan approved by the Board, the TSP Executive Director will contact frequent traders and strongly urge them to practice self-restraint or face administrative consequences.