This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

27917 

Vol. 87, No. 90 

Tuesday, May 10, 2022 

1See Thrift Savings Plan Enhancement Act of 

2009, Public Law 111–31, Division B, Title I, sec. 

104 (codified at 5 U.S.C. 8438(b)(5)(A)). 

FEDERAL RETIREMENT THRIFT 

INVESTMENT BOARD 

5 CFR Part 1601 

Mutual Fund Window 

AGENCY: Federal Retirement Thrift 

Investment Board. 

ACTION: Final rule. 

SUMMARY: The Federal Retirement Thrift 

Investment Board (FRTIB) adopts as 

final, without changes, a proposed rule 

concerning the Thrift Savings Plan 

(TSP)’s mutual fund window—which 

we will make available to TSP 

participants beginning in June 2022. 

This final rule establishes a fee designed 

to guarantee that the availability of the 

mutual fund window will not indirectly 

increase the share of TSP administrative 

expenses borne by participants who 

choose not to use the mutual fund 

window. We are also adopting policies 

to govern fund transfers to and from the 

mutual fund window, including a 

restriction on the amount that a 

participant may invest through the 

mutual fund window. 

DATES: The effective date is June 1, 

2022. 

FOR FURTHER INFORMATION CONTACT: Kim 

Weaver, Office of External Affairs, (202) 

465–5220 or Laurissa Stokes, Office of 

General Counsel, (202) 308–7707. For 

more information about when and how 

TSP participants can access the mutual 

fund window, please visit www.tsp.gov/ 

new-tsp-features/. 

SUPPLEMENTARY INFORMATION: The 

FRTIB administers the TSP, which was 

established by the Federal Employees’ 

Retirement System Act of 1986 

(FERSA), Public Law 99 335, 100 Stat. 

514. The TSP is a tax-deferred 

retirement savings plan for federal 

civilian employees and members of the 

uniformed services. The TSP is similar 

to cash or deferred arrangements 

established for private-sector employees 

under section 401(k) of the Internal 

Revenue Code (26 U.S.C. 401(k)). The 

provisions of FERSA that govern the 

TSP are codified, as amended, largely at 

5 U.S.C. 8351 and 8401–79. 

FERSA requires the TSP to offer the 

following individual investment funds 

to TSP participants: (1) A Government 

Securities Investment Fund (G Fund); 

(2) a Fixed Income Investment Fund (F 

Fund); (3) a Common Stock Index 

Investment Fund (C Fund); (4) a Small 

Cap Stock Index Investment Fund (S 

Fund); and (5) an International Stock 

Index Investment Fund (I Fund). 5 

U.S.C. 8438(b)(1)(A)–(E). 

In addition to these five individual 

funds, the TSP is statutorily required to 

offer Lifecycle (L) Funds which are 

target retirement date portfolios 

comprised of varying proportions of the 

five individual funds. 5 U.S.C. 

8438(c)(2). These statutorily mandated 

investment options are referred to as the 

TSP core funds. The FRTIB does not 

have discretionary authority to increase 

or change the types of core funds offered 

to TSP participants. 

I. Background 

A. What is a Mutual Fund? 

A mutual fund is formed when a 

special type of corporation called a fund 

company pools money from many 

individuals and invests the pooled 

money in other things such as stocks 

and bonds. Mutual funds offer 

individuals the ability to invest in 

hundreds of different holdings without 

having to make hundreds of separate 

purchases themselves. A mutual fund’s 

holdings are picked by a professional 

money manager—called an investment 

adviser—who is hired by the fund 

company. Investors buy shares in 

mutual funds. Investors (or their 

brokers) purchase mutual fund shares 

from the fund company itself (or its 

broker)—as opposed to purchasing them 

from other investors (or their brokers) 

on a secondary market such as the New 

York Stock Exchange. Each share 

represents an investor’s part ownership 

in the mutual fund and the net aggregate 

returns of the mutual fund’s investment 

holdings. 

B. What is a Mutual Fund Window? 

A mutual fund window is a type of 

brokerage window. A brokerage window 

is a retirement plan feature that allows 

participants to open a brokerage account 

to put some of their retirement savings 

in investments that are not curated by 

their retirement plan’s fiduciaries. 

Some retirement plans call this 

feature a ‘‘self-directed brokerage 

option’’. ‘‘Brokerage window’’ and ‘‘selfdirected brokerage option’’ are just two 

different names for the same feature. 

This feature is often described as ‘‘selfdirected’’ because it allows participants 

to forego some of the protections 

afforded by fiduciary oversight of 

investments in exchange for access to a 

much broader choice of investments. 

However, investing through a 

retirement plan feature is never as ‘‘selfdirected’’ as investing through a 

brokerage account outside of a 

retirement plan. For example, 

retirement plan participants do not pick 

their own brokerage firm. Usually, one 

of the retirement plan’s service 

providers (for example, its plan 

administrator or record keeper) selects a 

brokerage firm that will provide 

brokerage accounts and an online 

trading platform to the retirement plan’s 

participants via a subcontract. 

In addition, certain categories of 

higher-risk trades that can be made in 

brokerage accounts outside of a 

retirement plan are often excluded from 

brokerage windows. These categories 

include trading on margin and buying 

put or call options, futures contracts, or 

cryptocurrency. Subject only to 

categorical exclusions such as these, the 

specific investments available through a 

retirement plan’s brokerage window are 

typically determined by a cluster of 

agreements negotiated among the plan’s 

service provider, a brokerage firm, and 

fund companies. 

For the TSP’s brokerage window, 

Congress has excluded all categories of 

investments except for mutual funds.1

That is why it is called a mutual fund 

window. It is a type of brokerage 

window that is limited to mutual funds. 

C. Mutual Funds Versus TSP Core 

Funds: What is the Difference? 

Like mutual funds, the TSP core 

funds offer investors the ability to pool 

their money with other investors to 

purchase a share of a portfolio 

containing hundreds of investment 

holdings. The difference is that the TSP 

core funds are designed specifically for 

TSP participants. Only TSP participants 


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27918 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Rules and Regulations 

2ETAC is comprised of representatives from 

Federal and Postal unions and management 

associations, as well as a representative from the 

Department of Defense on behalf of uniformed 

service members. ETAC provides advice on matters 

relating to TSP investment policies and plan 

administration. 

3See April 2009 FRTIB Board Meeting Minutes, 

available at https://www.frtib.gov/MeetingMinutes/ 

2009/2009Apr.pdf. Links to attachments 

accompanying the minutes are embedded in the 

PDF of the minutes. 

4See May 2014 FRTIB Board Meeting Minutes, 

available at https://www.frtib.gov/MeetingMinutes/ 

2014/2014May.pdf; November 2014 FRTIB Board 

Meeting Minutes, available at https://

www.frtib.gov/MeetingMinutes/2014/2014Nov.pdf; 

July 2015 FRTIB Board Meeting Minutes, available 

at https://www.frtib.gov/MeetingMinutes/2015/ 

2015Jul.pdf. Links to attachments accompanying 

the minutes are embedded in the PDFs of the 

minutes. 

can invest in them, and their only goal 

is to maximize participants’ retirement 

savings. Mutual funds, on the other 

hand, are designed for the general 

public. As such, many different types of 

mutual funds exist to satisfy a wide 

variety of goals. 

II. Historical Context 

For many years, TSP participants 

have voiced a desire to have more 

investment options. In 2009, Congress 

passed legislation that authorized, but 

did not require, the FRTIB to offer a 

mutual fund window to TSP 

participants. Thrift Savings Plan 

Enhancement Act of 2009, Public Law 

111–31, Division B, Title I, sec. 104 

(codified at 5 U.S.C. 8438(b)(5)(A)). 

In the same year that Congress 

authorized the FRTIB to offer a mutual 

fund window, the FRTIB’s Executive 

Director initiated discussions with the 

FRTIB Board members and the 

Employee Thrift Advisory Council 

(ETAC) 2 about adding a mutual fund 

window to the TSP. In the April 2009 

FRTIB Board meeting, the four Board 

members in attendance deadlocked on 

the decision to adopt a resolution in 

support of the mutual fund window by 

a vote of two-to-two.3

To inform future discussions, the 

FRTIB assembled a cross-functional 

team of subject matter experts from its 

operations, legal, investment, finance, 

communications, research, and 

technology offices who spent the next 

several years studying industry 

practices, participant preferences, costs, 

and operational considerations 

associated with adding a mutual fund 

window to the TSP. Their research was 

presented to the FRTIB Board members 

and ETAC during public meetings in 

May 2014, November 2014, and July 

2015.4

In July 2015, the FRTIB Board 

members voted unanimously in support 

of adding a mutual fund window to the 

TSP. The FRTIB Executive Director 

committed to including a mutual fund 

window in the scope of services sought 

the next time the FRTIB recompeted its 

major service provider contract(s). In 

August 2019, the FRTIB announced the 

release of a request for proposals for 

various recordkeeping and plan 

administration services, including a 

mutual fund window. The contract was 

awarded in November 2020. The FRTIB 

is currently undergoing a transition to 

its new service provider(s). 

III. Proposed Rule 

On January 26, 2022, the FRTIB 

published a proposed rule with request 

for public comments in the Federal 

Register (87 FR 3940, January 26, 2022). 

We proposed to collect an 

administrative fee of $55 annually from 

mutual fund window users to guarantee 

that the availability of the mutual fund 

window does not indirectly increase the 

share of TSP administrative expenses 

borne by participants who choose not to 

use the mutual fund window. The 

preamble of the proposed rule informed 

the public that TSP mutual fund users 

will also incur other costs such as: (1) 

An annual maintenance fee of $95, (2) 

a per trade fee of $28.75, and (3) fees 

and expenses imposed by the specific 

mutual fund(s) in which they invest. We 

explained that these other costs are 

outside the scope of the proposed rule. 

We also proposed several terms and 

conditions that would govern fund 

transfers to and from the mutual fund 

window. For example, the proposed 

rule would require a minimum initial 

transfer of $10,000 and limit 

investments through the window to no 

more than 25% of the participant’s TSP 

account value. In addition, the proposed 

rule would count transfers to and from 

the mutual fund window against an 

existing limitation on the number of 

interfund transfers participants are 

allowed to make per month. 

We received feedback from 100 

commenters. Their comments fell into 

ten broad areas of concern, and our 

response to each concern is provided 

below. 

IV. Response to Public Comments 

A. Account Maintenance Fee and 

Trading Fee 

We received 44 comments from 

participants who believe the $95 annual 

maintenance fee and a $28.75 per trade 

fee are not competitive with prices 

negotiated by other retirement plans. 

Before addressing these comments, we 

want to note that the annual 

maintenance fee and per trade fee were 

negotiated using the procedures of 

Federal Acquisition Regulation (FAR) 

part 15 and were evaluated for 

reasonableness in accordance with FAR 

15.404–1. We also note that this final 

rule governs only the fees determined 

by the Executive Director in his role of 

setting policy to implement specific 

Congressional directives. Fees 

negotiated through acquisition 

procedures are beyond the scope of this 

final rule. 

Nevertheless, we think it is important 

to address the concerns raised by these 

commenters. The comments indicate 

that many TSP participants are under 

the impression that other retirement 

plans negotiate free brokerage services. 

We looked into what have been 

described as ‘‘free’’, ‘‘no-transactionfee’’, and ‘‘zero cost’’ mutual fund trades 

offered to participants in other 

retirement plans. We found that those 

prices are often caveated with fine print 

disclaimers, such as this: 

No-Transaction-Fee (NTF) mutual 

funds are no-load mutual funds for 

which [brokerage firm] does not charge 

a transaction fee. NTFs, as well as other 

funds, have other continuing fees and 

expenses described in the fund’s 

prospectus. [Brokerage firm] receives 

remuneration from fund companies for 

record keeping, shareholder and other 

administrative services. The amount of 

remuneration is based in part on the 

amount of investments in such funds by 

[brokerage firm] clients. 

The remuneration (i.e., fees) that 

brokerage firms receive from fund 

companies are treated by the fund 

companies as fund expenses, which are 

ultimately passed on to the people who 

have already invested in the fund. This 

type of arrangement between a 

brokerage firm and a fund company is 

called revenue sharing. 

Revenue sharing is not inherently 

pernicious. In many industries, revenue 

sharing is like a referral fee that a 

business owner might pay to 

compensate a person for bringing a new 

customer to their business. For most 

businesses, revenue sharing is a 

marketing cost borne by the business. 

Fund companies are, of course, 

businesses also. But fund companies are 

structurally different from other 

corporations. They typically have no 

employees, no physical assets, and no 

tangible products. They are just a 

collection of contracts relating to pools 

of money (i.e., funds), and they charge 

their costs of doing business to the 

people who have invested in the funds, 

regardless of how well the funds 

perform. Their unique corporate 

structure has led both Congress and the 

U.S. Supreme Court to conclude that 

‘‘the forces of arm’s-length bargaining 


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Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Rules and Regulations 27919 

5See ‘‘401(k) Plans: Increased Educational 

Outreach and Broader Oversight May Help Reduce 

Plan Fees’’, GAO–12–325 (April 24, 2012), available 

at https://www.gao.gov/products/gao-12-325; 

‘‘GAO: How Revenue Sharing Can Work, and Its 

Potential Impact on Participants’ Account 

Balances’’, YouTube, U.S. Government 

Accountability Office, 24 April 2012, https://

www.youtube.com/watch?v=PIRGduLn59A; ‘‘401(k) 

Retirement Plans: Many Participants Do Not 

Understand Fee Information, but DOL Could Take 

Additional Steps to Help Them’’, GAO–21–357 

(July 27, 2021), available at https://www.gao.gov/ 

products/gao-21-357. 

6Mutual funds use a document called a 

prospectus to disclose information about the fund 

to investors. The U.S. Securities Exchange 

Commission requires mutual funds to include 

certain information about the fund’s fees and 

expenses in the prospectus. 

7 ‘‘Understanding Brokerage Windows in SelfDirected Retirement Plans’’, Report to Honorable 

Martin Walsh, Secretary of the Department of Labor, 

Advisory Council on Employee Welfare and 

Pension Benefit Plans (2021), at 24, available at 

https://www.dol.gov/sites/dolgov/files/EBSA/aboutebsa/about-us/erisa-advisory-council/2021- 

understanding-brokerage-windows-in-self-directedretirement-plans.pdf. 

do not work in the mutual fund industry 

in the same manner as they do in other 

sectors of the American economy.’’ 

Jones v. Harris Assocs. L.P., 559 U.S. 

335, 338 (2010), quoting S. Rep. No. 91– 

184, at 5 (1969). This does not mean that 

there is something sinister about the 

mutual fund industry. It means only 

that the nature of the product makes the 

usual distinctions between price, cost, 

revenue, profit, and quality less clear 

than they are in other industries. 

Fund companies are not required to 

provide individualized statements to 

investors, detailing the exact dollar 

amount of the fund’s fees that each 

investor has indirectly paid. 

Consequently, revenue sharing between 

retirement plans, record keepers, 

brokerage firms, and fund companies 

can lead to confusing, opaque fee 

disclosures. Revenue sharing converts 

explicit fees (e.g., account maintenance 

fees and transaction fees) into less 

transparent fees (e.g., fees embedded in 

the fund’s expense ratio). By including 

the fees in the fund’s expense ratio, the 

return on an investment in that fund is 

reduced. Most participants in private 

sector plans have no idea that revenue 

sharing exists, much less how much it 

decreases the return of their 

investments.5

The FRTIB values transparency. We 

believe TSP participants need, and 

deserve, to see the dollar amount of the 

fees they pay for their mutual funds. 

Toward that end, TSP participants will 

pay account maintenance fees and 

certain transaction fees directly rather 

than paying them indirectly through 

revenue sharing. Furthermore, FRTIB 

has contractually required the TSP 

record keeper, their trading platform 

provider, their broker-dealer(s), and any 

of their other affiliates or subcontractors 

to rebate all revenue sharing payments, 

or any other type of indirect 

compensation, they receive in 

connection with participants’ mutual 

fund window investments. The rebates 

will be credited to participants’ mutual 

fund window accounts. This ensures 

that the dollar amounts of all fees and 

expenses borne by TSP participants for 

services provided in connection with 

their mutual fund window investments 

are explicitly disclosed. 

B. Concern That Participants Might Be 

Confused by New Fees 

One commenter expressed concern 

that participants might inadvertently 

incur fees which can, over time, cause 

serious damage to their retirement 

savings. We share this concern. Even 

small differences in fees can translate 

into large differences in returns over 

time. That is why we have chosen to 

make the fees paid to our service 

providers explicit at the risk of 

appearing less competitive than plans 

that compensate their service providers 

through revenue sharing arrangements. 

We intend to provide ongoing 

communication and education to TSP 

participants about the impact of fees on 

their retirement goals. We will also 

ensure that participants have 

convenient access to mutual fund 

prospectuses prior to making 

investment decisions.6 In addition, 

participants will have access to a tool 

that allows them to sort mutual funds by 

expense ratio, starting with the lowest 

expense ratios first. 

C. Minimum Core Balance 

We received 29 comments opposed to 

restricting the amount that a participant 

may invest through the mutual fund 

window. Under the proposed rule, 

transfers to a mutual fund window 

account cannot cause a participant’s 

mutual fund window account balance to 

exceed 25% of their total TSP balance. 

In effect, the proposed rule would 

require participants to maintain 75% of 

their balance in the TSP core funds. 

Some commenters described the 

minimum core balance as ‘‘punitive’’ 

and suggested that it casts doubt on the 

FRTIB’s sincerity in touting the mutual 

fund window as a benefit to TSP 

participants. Others are concerned that 

this restriction will impede their ability 

to achieve diversification among the 

funds in their mutual fund window 

account. We believe these commenters 

misunderstand the intended role of the 

mutual fund window. The mutual fund 

window enhances the TSP as a 

supplement to, rather than an 

alternative to, the core fund options. 

Other commenters described the 

minimum core balance as 

‘‘paternalistic’’ and asked the FRTIB to 

respect their autonomy when it comes 

to making financial decisions. We are 

sympathetic to these requests for more 

freedom of choice and autonomy. But 

retirement savings is a context in which 

autonomy is already constrained. 

Retirement plans (whether private or 

government-sponsored) are taxincentivized programs. People who 

choose to participate in retirement plans 

benefit personally from a large tax 

subsidy. The law mandates some 

constraints on autonomy to ensure those 

tax subsidies are effective for their 

intended purpose. Some constraints 

arise from the fact that fiduciaries of 

retirement plans can be sued by 

participants for exposing participants’ 

retirement savings to too much risk. 

Consequently, we are compelled to 

balance requests for more freedom of 

choice against the risk of damaging the 

trust placed in us by the vast majority 

participants who do not have the time 

it takes to research thousands of 

complex investment choices. 

Several commenters believe that a 

40% or 50% minimum core balance 

would be more reasonable. We 

understand that many private sector 

retirement plans offer brokerage 

windows with lower minimum core 

balance requirements, and that 50% is 

very common. However, it is not 

uncommon among the largest of private 

sector retirement plans to require 

participants to maintain 80% of their 

total balance in core funds.7 Given the 

TSP’s size, and the extraordinary 

amount of trust placed in us by more 

than 6.5 million participants, we believe 

it is appropriate for the FRTIB’s 

minimum core balance to be near the 

higher end of the range of minimum 

core balances that are common in the 

private sector. 

One commenter suggested tying the 

minimum core balance amount to each 

individual participant’s years of service 

and gradually decreasing it in 

increments of 5% per year as the 

participant’s years of service increase. 

For example, a participant with two 

years or less of service would be 

required to maintain a minimum core 

balance of 75%, a participant with 3 

years of service would be required to 

maintain a minimum core balance of 

70%, a participant with 4 years of 

service would be required to maintain a 

minimum core balance of 65%, and so 

on. We believe the enormous 


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27920 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Rules and Regulations 

8 ‘‘Understanding Brokerage Windows in SelfDirected Retirement Plans’’, Report to Honorable 

Martin Walsh, Secretary of the Department of Labor, 

Advisory Council on Employee Welfare and 

Pension Benefit Plans (2021), at 47, available at 

https://www.dol.gov/sites/dolgov/files/EBSA/aboutebsa/about-us/erisa-advisory-council/2021- 

understanding-brokerage-windows-in-self-directedretirement-plans.pdf (‘‘Investments accessible 

through a brokerage window are not routinely 

monitored by plan fiduciaries, and most experts 

conclude that, except perhaps in extraordinary 

circumstances, plan fiduciaries are not obligated to 

monitor brokerage window investments nor do their 

fiduciary duties apply with respect to those 

investments.’’). 

9See Thrift Savings Plan Enhancement Act of 

2009, Public Law 111–31, Division B, Title I, sec. 

104 (codified at 5 U.S.C. 8438(b)(5)(A)). 

10See ‘‘Mutual Funds and Exchange-Traded 

Funds (ETFs)—A Guide for Investors, U.S. 

Securities Exchange Commission’’, available at 

https://www.sec.gov/reportspubs/investorpublications/investorpubsinwsmfhtm.html. 

administrative complexity of this 

approach would outweigh any 

conceivable advantage it could offer. 

One commenter suggested the use of 

messaging and warning banners instead 

of a minimum core balance requirement 

to mitigate the potential for participants 

to invest heavily in undiversified funds. 

In our experience, messaging campaigns 

work best when the message is a rule of 

thumb—simple, universal, and clear. 

We are concerned that any message 

simple enough to be effective (such as, 

‘‘Don’t put all your eggs in one basket’’) 

would be insufficiently nuanced to be 

accurate in the context of the mutual 

fund window. Since almost all mutual 

funds can claim to be ‘‘diversified’’ in 

the sense that they have many different 

holdings, a simple message about the 

importance of diversification could be 

misleading without a host of additional 

specifications—such as the difference 

between diversifying within an asset 

class and diversifying across asset 

classes. 

One commenter asked whether a 

mutual fund window account balance 

that, due to earnings, exceeds the 25% 

restriction will be adjusted (i.e., 

liquidated) to bring the account to 25% 

of the participant’s total TSP balance. 

Investment earnings that cause a mutual 

fund window account balance to exceed 

25% of a participant’s total TSP balance 

will be permitted to remain in the 

mutual fund window account. However, 

a participant will not be permitted to 

transfer funds from the core funds to the 

mutual fund window if the participant’s 

mutual fund window account balance 

(including earnings) already exceeds the 

25% restriction or if the transfer would 

cause the participant’s mutual fund 

window account balance (including 

earnings) to exceed the 25% restriction. 

D. Fiduciary Oversight 

One commenter suggested that mutual 

funds offered through the window 

should be ‘‘vetted’’ by fiduciaries to 

ensure that they are prudent 

investments. Another commenter 

suggested that the FRTIB should offer a 

large variety of funds to ensure that 

there is no appearance of ‘‘favoritism’’ 

toward any mutual funds or fund 

companies. 

TSP participants will have access to 

approximately 300 mutual fund 

families. A mutual fund family includes 

all the separate funds offered by a single 

fund company. Since each family 

consists of multiple funds, the total 

number of funds available to TSP 

participants will be in the thousands. 

We have taken measures toward 

ensuring that our record keeper and 

brokerage firm are not motivated by 

conflicts of interest or other misaligned 

incentives that could influence which 

funds or fund families they make 

available to TSP participants. Many 

retirement plan record keepers also own 

subsidiaries that are fund companies or 

that provide investment management 

services to fund companies. It is 

common for these record keepers to 

design investment menus and exercise 

influence on retirement plan 

participants in a manner that benefits 

their subsidiaries. We have mitigated 

such conflicts of interests by hiring a 

record keeper that is not in the business 

of selling mutual funds. 

We intend to monitor for practices 

that might intentionally or 

unintentionally nudge participants to 

choose more expensive funds (or share 

classes) over less expensive funds (or 

share classes) with similar risk/return 

attributes. Toward that end, we have 

contractually guaranteed ourselves a say 

in the choice architecture of the digital 

interface through which participants 

choose mutual funds (e.g., the order in 

which choices are displayed and the 

language used to frame the choices). We 

will also ensure that if a mutual fund 

has a share class that gives preferential 

treatment to institutional investors (e.g., 

money managers, insurance companies, 

investment banks, commercial trusts, 

endowment funds, and hedge funds), 

those institutional share classes will be 

made available to TSP participants. 

We will not, however, evaluate or 

monitor any of the mutual funds to 

ensure that they are prudent 

investments. This mirrors the practice of 

private sector retirement plans.8

Fiduciary oversight of thousands of 

funds would place unreasonable cost 

and resource burdens on the FRTIB. 

Those cost increases could disadvantage 

TSP participants relative to participants 

of private sector retirement plans— 

whose fiduciaries do not evaluate or 

monitor investments offered through 

brokerage windows except in 

extraordinary circumstances. We are 

also concerned that the potential for 

appearing to favor some fund companies 

over others could raise novel issues 

under government ethics and 

contracting laws; and could run counter 

to the spirit of a myriad of provisions in 

the Federal Employees’ Retirement 

System Act that are designed to insulate 

the TSP from political involvement. 

We considered the less costly, less 

complicated alternative of 

implementing a screen whereby the 

FRTIB would adopt criteria (e.g., 

expense ratio of 1.00% or below) and 

restrict the window to those mutual 

funds that meet the FRTIB’s criteria. But 

we have decided against any screening 

criteria because we are concerned it 

would blur the distinction between 

funds that are fully endorsed by 

fiduciaries (i.e, the TSP’s core funds) 

and funds that only meet certain 

minimum thresholds established by 

fiduciaries. Participants who only want 

simple choices that are fully endorsed 

by the FRTIB may feel overwhelmed or 

misled if we make it hard to distinguish 

between the level of fiduciary 

involvement in TSP core funds and the 

level of fiduciary involvement in the 

funds offered through the mutual fund 

window. In view of this concern, we 

believe that the vast majority of TSP 

participants will be better served by a 

clear, frequent, prominent, and 

unequivocal warning that the FRTIB 

does not provide fiduciary oversight of 

the mutual funds offered through the 

window. 

Participants who prefer funds that are 

overseen by FRTIB fiduciaries should 

invest in the TSP core funds. 

E. Other Investment Options 

Several commenters suggested that, 

instead of mutual funds, the FRTIB 

should offer individual stocks, 

individual bonds, or exchange-traded 

funds through the brokerage window. 

By law, mutual funds are the only type 

of investment the FRTIB is permitted to 

offer through the brokerage window.9

Mutual funds offer certain advantages 

over purchasing individual stocks and 

bonds, such as built-in professional 

management; and they are the most 

common type of investment in private 

sector 401(k) retirement plans. Although 

exchange-traded funds offer similar 

advantages, they are not—technically 

speaking—mutual funds.10


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11Federal Employees’ Retirement System Act of 

1986, Public Law 99–335, H.R. CONF. REP. 99–606, 

1986 U.S.C.C.A.N. 1508 (‘‘Most importantly, the 

three funds authorized in the legislation are 

passively managed funds, not subject to political 

manipulation. A great deal of concern was raised 

about the possibility of political manipulation of 

large pools of thrift plan money. This legislation 

was designed to preclude that possibility.’’). 

12Participants’ Choices of TSP Funds, 73 FR 

22049 (April 24, 2008), available at https://

www.federalregister.gov/documents/2008/04/24/E8- 

8957/participants-choices-of-tsp-funds. 

F. Objections to Offering a Mutual Fund 

Window 

Several commenters objected to the 

fact that the FRTIB is offering a mutual 

fund window at all. Others believe that 

the mutual fund window should be a 

lower priority than other possible 

improvements to the TSP. The decision 

to offer a mutual fund window was 

made by a vote of the FRTIB Board 

members in July 2015 and, therefore, is 

not the subject of this regulation. 

Nevertheless, we wish to assure these 

commenters that the FRTIB is also 

adding a host of other new features 

which are consistent with many of the 

priorities these commenters have 

articulated. We do not believe that 

satisfying the diverse preferences of the 

TSP’s 6.5 million participants must be 

a zero-sum game. We are confident we 

can offer a mutual fund window for 

participants who want it at no cost to 

participants who don’t, while also 

offering many other new features that 

participants with other priorities will 

appreciate. For information about other 

new features, we invite TSP participants 

to view https://www.tsp.gov/new-tspfeatures/. 

Some commenters suggested that, 

instead of offering a mutual fund 

window, the FRTIB should expand the 

number of its core funds or should 

select indexes that allow for more 

diversification within its individual 

core funds. The FRTIB does not have 

the statutory authority to expand its 

core fund options. Only Congress can do 

that, and Congress authorized a mutual 

fund window instead of adding more 

funds to the TSP’s core fund menu. 

Congress has historically found that 

offering a small core menu of low-cost, 

passively-managed funds is most 

conducive to promoting the integrity of 

the Thrift Savings Fund.11

The FRTIB periodically hires 

professional investment consultants to 

evaluate the diversification of the TSP’s 

core fund menu compared to the menus 

of other retirement plans and to perform 

benchmark studies of the TSP’s 

individual core funds. We invite TSP 

participants to view these studies at 

https://www.frtib.gov/ReadingRoom/. 

G. Administrative Fee 

We received 6 comments relating to 

the $55 administrative fee. Four 

commenters supported the fee and two 

commenters objected to it. 

One commenter suggested that a $25- 

$30 fee would be more reasonable. This 

commenter did not offer a rationale for 

why $25-$30 would be more reasonable 

or suggest an alternative means of 

deriving an appropriate fee amount. 

Another commenter suggested that all 

TSP participants should share in the 

cost of the mutual fund window. We 

believe this suggestion would conflict 

with an explicit Congressional directive 

to ‘‘ensure that any expenses charged for 

use of the mutual fund window are 

borne solely by participants that use 

such window.’’ 5 U.S.C. 8438 (b)(5)(B). 

We are, therefore, adopting the 

proposed rule as final without 

substantive change. 

H. Number of Interfund Transfers 

We received 22 comments objecting to 

an existing rule that allows only two 

interfund transfers per month. We 

proposed that the transfer from a 

participant’s TSP account to their 

mutual fund window account, or vice 

versa, will count toward the existing 

monthly limit on interfund transfers. 

Trading within the mutual fund 

window will be restricted only by fees 

and rules that may be imposed by the 

mutual funds in which participants 

choose to invest. 

None of the commenters addressed 

the application of the FRTIB’s existing 

rule to transfers to and from the mutual 

fund window. Instead, the commenters 

objected, more generally, to the existing 

rule as it currently applies to the TSP’s 

core funds. 

We sought public comments on the 

existing rule long ago. We published it 

as a final rule in April 2008.12 Every 

comment about interfund transfers 

provided in response to our mutual 

fund window proposed rule was 

thoroughly addressed in the preamble of 

the 2008 final rule. We are not revisiting 

the existing rule. We, therefore, believe 

these comments are outside the scope of 

the final rule that we are publishing 

today. 

The purpose of the existing rule is to 

prevent a small number of TSP 

participants who pursue ‘‘market 

timing’’ active investment strategies 

from diluting the earnings of other TSP 

participants and adversely affecting the 

ability of TSP investment managers to 

replicate the performance of selected 

indexes as required by law. The 

rationales for the existing rule are 

equally applicable to transfers to and 

from the mutual fund window. We are, 

therefore, are adopting the proposal as 

final without change. 

I. Minimum Initial Transfer 

We received 3 comments objecting to 

our proposal to require a $10,000 

minimum initial fund transfer to the 

mutual fund window. As explained in 

our proposed rule, the combination of 

the $10,000 initial fund transfer 

requirement and the 75% minimum 

core balance requirement means that an 

account must have at least $40,000 to be 

eligible to take advantage of the mutual 

fund window. The purpose of this 

requirement is to ensure that 

participants have some investment 

experience before they confront 

additional risks and expenses that may 

be associated with using the mutual 

fund window. 

Two commenters expressed concern 

that the minimum initial transfer 

requirement would prohibit new 

employees from accessing the mutual 

fund window. One commenter pointed 

out that, with today’s highly mobile 

workforce, many new TSP participants 

may have gained sufficient investment 

experience from retirement assets they 

have invested elsewhere. We note that 

new employees can roll over money into 

the TSP from other retirement plans to 

meet the $10,000 minimum initial fund 

transfer requirement. We believe the 

ability to roll other retirement 

investments into the TSP is sufficient to 

address the concern that experienced 

investors who are new Federal 

employees will not be able to access the 

mutual fund window. 

Two commenters stated that the 

minimum initial fund transfer amount is 

higher than the industry norm. 

Brokerage firms often impose minimum 

initial fund transfer requirements for the 

purpose of ensuring that the cost of 

servicing a large number of small 

investments does not exceed the 

revenue the brokerage firm requires to 

offer its services. The FRTIB’s minimum 

initial fund transfer requirement serves 

a very different purpose, which makes 

a comparison to industry norms 

inapposite. We are, therefore, adopting 

the proposed rule as final without 

change. 

J. Miscellaneous 

One commenter suggested that the 

proposed rule relies on outdated survey 

results concerning the preferences of 

TSP participants. We believe this 

commenter misunderstood the purpose 

for which we cited 2008 survey results 

in the proposed rule. We cited 2008 

survey results merely to provide 


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27922 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Rules and Regulations 

chronological historical context for the 

evolution of the legislation that 

authorized the FRTIB to offer a mutual 

fund window and the FRTIB’s 

subsequent decision to exercise that 

authority. For a thorough account of all 

the research and deliberation behind the 

FRTIB’s 2015 decision to offer a mutual 

fund window, we invite TSP 

participants to view the May 2014, 

November 2014, and July 2015 Board 

meeting materials at https://

www.frtib.gov/MeetingMinutes/. 

One commenter asked if a participant 

must set up two mutual fund window 

accounts if a participant wants to invest 

both traditional and Roth contributions. 

Nothing in the proposed rule or this 

final rule requires a participant set up 

two mutual fund window accounts for 

this purpose. A participant can transfer 

both traditional and Roth contributions 

into the same mutual fund window 

account. 

One commenter asked, with respect to 

the mutual fund window, how the 

FRTIB would address future legislation 

that might restrict investing in certain 

foreign countries and how the FRTIB 

would implement such legislation. The 

FRTIB will comply with legislation 

enacted by Congress that applies to the 

TSP. The manner in which we would 

implement such legislation depends on 

the specific legislation. 

One commenter considered the 

process of investing through the mutual 

fund window too cumbersome and 

suggested we make a money market 

sweep fund available within the TSP so 

participants would not have to invest in 

a core fund prior to transferring money 

to the mutual fund window. To make 

the TSP’s recordkeeping more efficient 

and keep costs low for all participants, 

the record keeper, through a brokerage 

firm, will handle all operations of the 

mutual fund window, including the 

sweep fund that will receive transfers 

from the core funds. Having the TSP 

operate the sweep fund would negate 

the efficiency gains that come from 

outsourcing the operation of the mutual 

fund window to the record keeper and 

brokerage firm. 

One commenter asked why 

participants cannot invest their 

employee contributions directly into the 

mutual fund window. Allowing direct 

contributions to the mutual fund 

window would require creating linkages 

between hundreds of government 

payroll offices and the mutual fund 

window, which again, would 

undermine the efficiency gains that 

come from outsourcing the operation of 

the mutual fund window. 

Many commenters objected to the 12 

p.m. eastern time cutoff for transferring 

amounts to and from the mutual fund 

window. The 12 p.m. eastern time cutoff 

for all TSP transactions is set forth in 5 

CFR 1601.32 and was not a subject of 

the proposed mutual fund window 

regulation. Therefore, the comments are 

beyond the scope of this regulation. 

Nevertheless, we will address the 

concerns. 

Since the TSP went to a daily 

valuation in 2003, we have required that 

transactions must be requested before 12 

p.m. eastern time to post on the same 

day. For transactions requested at or 

after 12 p.m. eastern time, the 

transaction will post the next business 

day. The 12 p.m. eastern cutoff is 

necessary to allow the TSP to begin the 

investment transaction cycle which, 

given the size of the TSP and number 

of transactions it processes each day, is 

a multipart and complex process. 

Because the transfer into and out of the 

mutual fund window will involve the 

sale or purchase of TSP funds, such 

transfers are also subject to the 12 p.m. 

eastern time cutoff. Transactions within 

the mutual fund window (i.e., purchase 

and sale of mutual funds) are generally 

subject to a 4 p.m. eastern time cutoff. 

Some mutual funds may have earlier 

purchase cutoff times prior to the 4 p.m. 

eastern time cutoff, which would be 

disclosed by fund. 

V. Final Rule 

For reasons explained above, the 

FRTIB is adopting the proposed rule as 

final, without any substantive changes. 

Although the comments received did 

not cause us to make changes to the 

proposed rule, we did carefully consider 

all comments received. We have 

appreciated the opportunity to review 

and respond to comments from 

participants who take an active interest 

in the TSP and wish to offer 

suggestions. The comment process 

allowed us to address any 

misunderstandings about the mutual 

fund window, to learn if there are 

unanticipated legal or policy 

impediments to the proposal, and to 

hear suggestions about how better to 

implement the mutual fund window. 

Regulatory Flexibility Act 

This regulation will not have a 

significant economic impact on a 

substantial number of small entities. 

This regulation will primarily affect 

Federal employees, members of the 

uniformed services who participate in 

the TSP, and beneficiary participants. 

Paperwork Reduction Act 

This regulation does not require 

additional reporting under the criteria of 

the Paperwork Reduction Act. 

Unfunded Mandates Reform Act of 

1995 

Pursuant to the Unfunded Mandates 

Reform Act of 1995, 2 U.S.C. 602, 632, 

653, and 1501–1571, the effects of this 

regulation on state, local, and tribal 

governments and the private sector have 

been assessed. This regulation will not 

compel the expenditure in any one year 

of $100 million or more by state, local, 

and tribal governments, in the aggregate, 

or by the private sector. Therefore, a 

statement under 2 U.S.C. 1532 is not 

required. 

Submission to Congress and the 

General Accounting Office 

Pursuant to 5 U.S.C. 810(a)(1)(A), the 

FRTIB submitted a report containing 

this rule and other required information 

to the U.S. Senate, the U.S. House of 

Representatives, and the Comptroller 

General of the United States before 

publication of this rule in the Federal 

Register. This rule is not a major rule as 

defined at 5 U.S.C. 804(2). 

List of Subjects in 5 CFR Part 1601 

Government employees, Pensions, 

Retirement. 

Ravindra Deo, 

Executive Director, Federal Retirement Thrift 

Investment Board. 

For the reasons stated in the 

preamble, the FRTIB amends 5 CFR 

chapter VI as follows: 

PART 1601—PARTICIPANTS’ CHOICE 

OF TSP FUNDS 

■ 1. The authority citation for part 1601 

continues to read as follows: 

Authority: 5 U.S.C. 8351, 8432d, 8438, 

8474(b)(5) and (c)(1). 

■ 2. Add subpart F to read as follows: 

Subpart F—Mutual Fund Window 

Sec. 

1601.51 Applicability. 

1601.52 Fund transfers. 

1601.53 Fees. 

§ 1601.51 Applicability. 

This subpart applies only to the 

transfer of amounts between the TSP 

core funds and the mutual fund 

window; it does not apply to the 

investment of future deposits, which is 

covered in subpart B of this part, or 

fund reallocations or fund transfers 

among the TSP core funds, which is 

covered in subpart C of this part. 

§ 1601.52 Fund transfers. 

(a) Fund transfers into mutual fund 

window. A participant may elect to 

make one or more fund transfers to the 

mutual fund window from the portion 


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Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Rules and Regulations 27923 

of his or her TSP balance invested in the 

TSP core funds, subject to the following 

rules: 

(1) The participant must establish a 

mutual fund window account that is 

separate from his or her TSP account. A 

participant with more than one TSP 

account may establish a separate mutual 

fund window account for each TSP 

account, and the limitations and fees 

described in subpart will apply 

separately to each account; 

(2) If the participant does not have an 

acknowledgment of risk on file as of the 

date of his or her initial fund transfer 

request to the mutual fund window, the 

participant must complete an 

acknowledgment of risk for the fund 

transfer to be processed; 

(3) Fund transfers must be made in 

whole dollar increments (percentages 

are not permitted); 

(4) The following limitations must be 

satisfied: 

(i) A participant’s initial fund transfer 

into his or her mutual fund window 

account must be at least $10,000 and 

may not exceed 25 percent of the 

participant’s TSP account balance, as of 

the date of such transfer; and 

(ii) Subsequent fund transfers into a 

participant’s mutual fund window 

account may not cause the balance in 

the participant’s mutual fund window 

account to exceed 25 percent of the 

participant’s total TSP balance, as of the 

date of any such transfer; 

(5) Each fund transfer into the mutual 

fund window counts toward the 

monthly limit set forth in § 1601.32(b); 

(6) Amounts transferred to a 

participant’s mutual fund window 

account will initially be invested in a 

sweep money market fund. 

Subsequently, the participant may 

direct the investment of the transferred 

amounts into any mutual fund(s) that 

are available through the mutual fund 

window; 

(7) Fund transfers are subject to the 

fees set forth in § 1601.53; and 

(8) A participant may not withdraw 

funds directly from his or her mutual 

fund window account. To make a 

withdrawal, the participant must elect a 

fund transfer back to the TSP core funds 

as described in paragraph (b) of this 

section. Upon completion of such fund 

transfer, the participant may make a 

withdrawal in accordance with 5 CFR 

part 1650. 

(b) Fund transfers back to TSP core 

funds. A participant may elect to make 

a fund transfer to the TSP core funds 

from amounts invested in his or her 

mutual fund window account, subject to 

the following rules: 

(1) Fund transfers must be made in 

whole dollar increments (percentages 

are not permitted); 

(2) Amounts to be transferred from a 

participant’s mutual fund window 

account to the TSP core funds must first 

be transferred to the sweep money 

market fund. Subsequently, the 

participant may direct the investment of 

the transferred amounts into the TSP 

core funds; 

(3) Each fund transfer back to the TSP 

core funds from the mutual fund 

window account counts toward the 

monthly limit set forth in § 1601.32(b); 

except, however, that a participant may 

always elect a fund transfer from the 

mutual fund window account to the G 

Fund; and 

(4) Fund transfers are subject to the 

fees set forth in § 1601.53. 

(c) Forced transfers. The TSP record 

keeper will force a transfer from the 

participant’s mutual fund window 

account to the TSP core funds in the 

following situations, and subject to the 

following rules: 

(1) A forced transfer may occur if the 

balance invested in the TSP core funds 

is insufficient to cover: 

(i) Amounts necessary to comply with 

a court order, legal process, or levy 

described in 5 CFR part 1653; 

(ii) A beneficiary asset transfer; 

(iii) A required minimum 

distribution; 

(iv) An automatic cash out 

distribution; or 

(v) Any other payment or transfer that 

the Board is required by law to make 

from the participant’s TSP account 

balance; 

(2) The amount of the forced transfer 

shall be equal to the amount of the 

insufficiency described in paragraph 

(c)(1) of this section, plus $1,000; 

except, however, that if the participant’s 

mutual fund window account balance is 

less than $25,000, the entire mutual 

fund window account balance shall be 

transferred to the TSP core funds; 

(3) Forced transfers shall be 

liquidated from the participant’s mutual 

fund window account first from 

amounts held in the sweep money 

market fund; and then from amounts 

invested in mutual funds, beginning 

with the position with the highest 

balance; 

(4) Forced transfers from a 

participant’s mutual fund window 

account to the TSP core funds shall be 

invested according to the participant’s 

existing contribution allocation; and 

(5) The participant shall be 

responsible for any fees incurred as a 

result of the forced transfer. 

§ 1601.53 Fees. 

(a) The Board will allocate a portion 

of the TSP’s administrative expenses to 

mutual fund users by charging an 

administrative fee of $55.00 annually. 

The amount of this fee will be 

redetermined once every three years by 

multiplying the average mutual fund 

window account balance by the TSP 

administrative expense ratio, as of the 

date of redetermination. 

(b) The fee described in paragraph (a) 

of this section 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. 

[FR Doc. 2022–09972 Filed 5–9–22; 8:45 am] 

BILLING CODE 6760–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2022–0084; Project 

Identifier MCAI–2020–01312–A; Amendment 

39–22012; AD 2022–08–09] 

RIN 2120–AA64 

Airworthiness Directives; Pilatus 

Aircraft Ltd. Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for all 

Pilatus Aircraft Ltd. (Pilatus) Model PC– 

24 airplanes. This AD was prompted by 

a failure of the dual ethernet 

communication channel on a dualchannel data concentration and 

processing unit, which triggered the 

opening of electronic circuit breakers 

that caused several unintended system 

activations. This AD requires installing 

a software (SW) upgrade to the utility 

management system (UMS), as specified 

in a European Union Aviation Safety 

Agency (EASA) AD, which is 

incorporated by reference. The FAA is 

issuing this AD to address the unsafe 

condition on these products. 

DATES: This AD is effective June 14, 

2022. 

The Director of the Federal Register 

approved the incorporation by reference 

of a certain publication listed in this AD 

as of June 14, 2022. 


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