You might see some more very tough comments on this - actually you will.
TSP automatic enrollment, fund transfer restrictions move forward
By Alyssa Rosenberg
arosenberg@govexec.com April 21, 2008
I am just at a loss to understand why all of the letters to congress and replies to the TSP about limiting my ability to move my money more then twice a month has gone unheard. Seems they had already made up their minds before they asked the question. Maybe I will write my congressman again and discuss allowing federal employees to withdraw their funds. That will get the attention of the TSP. Anyone want to help with that option?
Chuck Wamack Posted April 22, 2008 4:34 PM
I agree that the people who want to execute multiple interfund transfers should be able to pay a fee to do so. That way, the other people in the fund will not unwillingly subsidize their activity. I also agree that making automatic enrollment the default option for new hires makes sense. People can opt out if they are so inclined.
The Government has a vested interest in keeping as much money in the TSP as possible. Each year, the big balances in the investment accounts offset a huge amount of government spending on the books, thus making the annual federal deficit appear to be much smaller than it really is.
The TSP model reminds one of the insurance industry, if you compare the TSP to a whole life or universal life policy. You get a choice of what special account your premium goes into, but the fine print on the policy says that the special account is the property of the insurance company. Many people writing in seem to think that the TSP Board treats individual accounts this way, too. You have to pay interest when you borrow your "own" cash out of the policy, just like when you borrow from your own TSP accounts. The insurance company offers their menu of chosen investment options in their policies, just as the TSP does. The TSP takes a percentage off the top for expenses, even if your accounts don't make any money that year, just like the insurance companies. And the options to cash out a policy are also controlled, just as the TSP's options are limited, to hold down costs. Of course, TSP's expenses are way lower than the insurance industry's are. And the insurance companies don't offer a dollar-for-dollar match on your premiums, either.
Budgeteer Posted April 22, 2008 4:27 PM
I'm not sure how one could take a position that employees are abusing a system when they are abiding by the rules in place. Now the TSP managers have punished employees for utilizing the system within established rules. The decisions they have made are arbitrary. Those identified as "abusers" are now forced to rebalance their accounts by mail. Once recieved, these forms are taking up to a week or more to process! With a volatile market, how can one possibly manage their account under those conditions? Make no mistake, TSP members are being punished for rebalancing as they were legally allowed to do. Oddly enough, those not identified as "abusers" are still allowed to rebalance daily. Others have been restricted even though they did not receive an initial warning. Some of these have had the decision reversed. Not only that, but TSP managers are now monitoring message boards where TSP members are discussing this issue and using that information against them. If this isn't over reaching and abuse of power, than I don't know what is.
Joe Posted April 22, 2008 3:44 PM
Statistic after statistic shows that the more people mess with their investments, the lower their annual performance, ON AVERAGE. I'm tired of all the folks who think they can do better, _lower investment costs_ is the only _statistically proven_ way for most people to outperform, not specific fund or allocation changes. If more of the know-it-alls would read _Millionaire Next Door_, maybe they would have a better understanding of the relevant information. I've had a few different 401k's and SIMPLE IRA's at previous employers, and the TSP is a flat-out superior plan to them. I don't care if you think the grass is greener on the other side of the fence. Most people are doing better with the TSP then they would on their own, and the TSP serves them well. Remember that this is the majority, folks.
Thomas Posted April 22, 2008 2:51 PM
First the lack of new members joining this system is a result of the changing Federal workforce where many of the employees who are retiring are having those jobs backfilled by contractors who are not eligiable to join the TSP program. Second the choices to determine our own stragies for managing our own TSP funds are being limited by the new rules that the controllers of this fund have dictated to be put in place. During the pass 6 weeks not only was I able to basically protect my funds from losses that were predicted correctly by the financial news groups by movement to the G fund I was also able to partially jump back to the I fund and make about 4K on a 50K investment in the I fund that I would not have had the chance to do under limited transfers. Bottom line the money belongs to the individuals, not the controllers which makes limiting the number of transfers just wrong!
Peter Crumley Posted April 22, 2008 1:25 PM
First you want to tell contributors they can only move THEIR money twice a month regardless of market conditions, thereby limiting their free will. Now you want to automatically FORCE people to contribute without the benefit of determining freely how and when their money can be invested. And they talk about allowing private investing for social security. I don't know about anyone else, but this is nuts to me. Will someone put an end to this insanity.
joe dygas Posted April 22, 2008 11:56 AM
Current TSP was outdated when FRTIB bought it. Costs savings were a direct result of service cuts. It's only a matter of time before ALL of the TSP, not just the G fund is controlled totally by the FRTIB in order to keep the financial systems afloat. The real issue is that control of billions of dollars is a heady thing, and being able to effect markets is power in its purest sense. It's crazy how governing committee picks at the TSP (for money). I wish someone would do something about the cost of a gallon of gas.
Loose Change Posted April 22, 2008 11:54 AM
Being over 59.5 years of age, in early January 2008 I moved 100% of my TSP funds to a Charles Schwab traditional IRA. As of yesterday evening, 4/21/08, I'm up 23%. Too bad TSP participants are essentially trapped until they're 59.5 years old. There seems to be a movement to restrict government employees' ability to manage their retirement funds. For example, until September 2007, under IRS Revenue Ruling 90-24, teachers and others with 403(b) plans, regardless of age, could move their funds to brokers like Charles Schwab where they would have a much wider range of investment options at lower fees - in September the IRS slammed the door shut on that option. The question is, who benefits from large pools of dependably stable retirement funds - the banks, brokers, or even the government itself? And why?
Ed Posted April 22, 2008 11:31 AM
It is always interesting to read this type of article. While it appears to me the TSP Board should be focusing on money management decisions to protect the life savings and retirement funds of federal employees, they are spending their time trying to prevent people from trying to protect their own savings. I would think the TSP would be trying to find ways to improve the process of alerting enrollees of potential losses of their life's savings and retirement funds and instituting a safe habor against huge losses as many enrollees have encountered this year.
richard l. redmon Posted April 22, 2008 11:28 AM
I plan to retire in FY-2011 and I hope OPM would have the RetireEZ plan in place by then. I just assisted an elmpoyee with his Retirement papers. There was 21+ sheets of papers to fill out and my ageny waited until a week before he is to retire, presented him with all of these forms, which was very unfair. Sometime you may have to send to another agency for information for proof.
Peggy A. Jackson Posted April 22, 2008 10:10 AM
Automatic enrollment in TSP? What a wonderful idea. After dismantling CSRS 20 some years ago, we'll now have Social Security plus Mandatory TSP. Perhaps to the tune of 7% of salary? Why not move people back into CSRS. Seems to me FERS failed if it has to be forced.
what a joke Posted April 22, 2008 8:37 AM
The TSP is made up of index funds. However, in this article the TSP leadership makes it appear that they are actively managing our money ("modeling" and potentially making "major changes" in their "investment approach"). They are making their role seem bigger than it is or should be in order to create a false sense of security amoung TSP investors. The current TSP leadership has a condesending, big brother attitude toward its investors. They appear to believe TSP investors are uninformed, easily fooled and need protection from themselves.
