Thrift Savings Plan participants appear to be recovering their confidence in the stock market and the federal government's retirement plan.

The stock-based C, S and I funds had their second consecutive month of positive performance in April after more than a year of frequently dismal returns. And after moving billions of dollars into the lower-risk, lower-reward G Fund's government securities for more than a year, participants transferred more than $600 million out of that fund and into the C, S and I funds and the L, or lifecycle, funds in April, the Federal Retirement Thrift Investment Board said May 18.

"Bottom line is, there's been two good months of performance," said Gregory Long, the board's executive director. "That's good news, but it doesn't necessarily mean the rocky ride is over."

Renee Wilder, director of the board's Office of Research and Strategic Planning, said the participation rates of employees covered under the Federal Employees Retirement System — the percentage of those who contribute money to their TSP accounts — are also recovering, from a low of 83.4 percent in December to 84.6 percent last month. However, that is still short of the 86 percent FERS participation rate that was the high point of 2008.

"Our participants have not bailed out on us," Wilder said. "Slowly but surely, our participation rate is inching back up to the levels that we had last year, before the market collapse."

The increase in employee contributions and positive returns helped to push TSP's fund balance back above $200 billion for the first time since December.

Changes afoot in Congress

Meanwhile, the Senate is advancing a tobacco bill that would bring big changes to TSP, said Tom Trabucco, the board's legislative affairs director. The bill would create a Roth 401(k) option that would allow participants to put some or all of their after-tax salary into an account that will grow without tax liability on future earnings. It also would allow an account to transfer to a participant's spouse when the participant dies, and would automatically enroll newly hired civilian employees into TSP's G Fund unless they opt out.

"I think it's going to happen," Trabucco said. "The bill has a lot of momentum."

The version passed by the House in April also would allow the board to create a mutual fund option allowing participants to invest pretax money in private-sector mutual funds. But it's unclear if that provision would make it into the Senate bill. The board is split about the mutual fund option, but would not oppose the bill if the option stays in the final version.

The board is concerned that the House's mutual fund plan, which would direct the board to choose which mutual funds would be available to participants, would present too many administrative, logistical and political challenges. Trabucco said lawmakers have been open to hearing the board's concerns on mutual funds.

Most board members support adding the Roth option. Military personnel are expected to benefit most from the addition of a Roth option to TSP because they typically fall into lower tax brackets early in their careers and finish their careers in higher tax brackets. A November survey conducted by TSP found most participants want a Roth option. But adding such an option would require TSP to modify its recordkeeping, accounting and payroll systems and change its enrollment and loan forms, tax notices and communications materials. Those changes could take up to two years and cost more than $6 million.

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