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http://www.fcw.com/article89181-06-12-05-Print
Is TSP a model for Social Security?
Bush cites Thrift Savings Plan as model for personal accounts
BY Florence Olsen
Published on Jun. 12, 2005
In his State of the Union address earlier this year, President Bush talked about using a portion of Social Security payroll taxes to create personal retirement accounts. He compared his proposal to the Thrift Savings Plan, a retirement benefit for federal employees.
The plan lets employees invest a portion of their paychecks in any one of five investment funds. "It's time to extend the same security and choice and ownership to young Americans," Bush said.
Little has been said about how the federal government would administer personal retirement accounts for tens of millions of Americans. Social Security Administration officials said it would be premature to comment. Likewise, Gary Amelio, executive director of the Federal Retirement Thrift Investment Board, which administers the Thrift Savings Plan, said he could speak only about it.
But some policy advisers insist that, despite differences, the plan is the administrative model behind some legislative proposals to change Social Security. So how do federal administrators manage personal accounts for 3.4 million employees?
The investment board administers the federal plan with a staff of 90 employees, most of whom are policy and oversight officials and some of whom are information systems employees. "We're running very efficiently," Amelio said.
The federal government has 130 payroll offices that remit employees' payroll contributions to the investment board, which handles recordkeeping internally. The board recently bought a new IBM mainframe, which has 10 times the capacity of the old one, to process and store all the personal account information, Amelio said. "I can tell you it looks like Darth Vader," he said.
Since 1986, when the Thrift Savings Plan was authorized by Congress and offered to federal employees, the Agriculture Department's National Finance Center in New Orleans has handled many back-office functions for the plan on a cost-recovery basis.
But as part of a three-year cost-cutting effort, Amelio said, this year the board will offer companies a chance to bid competitively on call centers and other back-office functions.
The federal retirement savings plan has among the lowest administrative costs of any defined contribution investment plan, Amelio said.
"We operate at about six basis points," he said, which means administrative costs are 60 cents per $1,000 invested.
"If you look at most defined contribution plans in this country, the average basis-point charge that the participants are paying is anywhere from 40 to 150 basis points," he said.
Compared with most companies' 401(k) plans, the federal plan is inexpensive to administer because it has a large volume of assets — $155 billion — and a high participation rate. About 3.4 million civilian and military employees contribute to personal accounts. With such large numbers, "you get economies of scale," Amelio said.
Other factors contribute to the plan's administrative efficiency. Of the five funds in which federal employees can invest, four are index funds. Investors typically pay no management fees for such funds because the investments match broad market indexes such as the S&P 500 for stocks or the Lehman Brothers Aggregate Bond Index. The federal statute that created the savings plan prohibits its administrators from offering more expensive funds that charge portfolio management fees.
"If we were to not use index funds or go out and use other exotic investments, it would drive our costs up 100 to 200 times," Amelio said.
Since 1986, Barclays Global Investors has won a succession of contracts from the board to execute federal employees' investment choices in the four index funds. Working with the Treasury Department, the board administers a fifth fund, the G or government fund, which lets employees invest their money in U.S. government securities.
"We're a daily plan, which means participants can move their money on any day that the markets are open," Amelio said. Federal employees can move their money into different funds by informing the plan administrator via the Thrift Savings Plan's Web site, a toll-free response line or a paper form.
"We're doing the bulk of our interfund trades now online," he said. "We do about a quarter of a million trades each month."
Amelio's pet project has been adding life cycle funds to the mix. He said those "funds of funds" combine the plan's five existing funds using an asset allocation model that corresponds to employees' retirement plans.
The life cycle funds, which the board will offer this summer, will give employees who expect to retire by 2010, 2020, 2030 or 2040 the option of choosing current retirement income or future investment income.
The funds will be rebalanced daily and reallocated quarterly so that they remain aligned with the funds' investment objectives, Amelio said.
The Thrift Savings Plan, with significant differences, is the model for Social Security legislation introduced by Rep. Paul Ryan (R-Wis.) and Sen. John Sununu (R-N.H.).
"That's the model, but there'll be a lot more people and more funds" and authority to pay contractors to do the accounting, said Peter Ferrara, a senior fellow at the business-oriented Institute for Policy Innovation and director of domestic policy for the Free Enterprise Fund.
Some policy-makers have adopted the Thrift Savings Plan as their model for Social Security personal retirement accounts.
Here are several facts about the retirement savings plan for federal employees:
http://www.fcw.com/article89181-06-12-05-Print
Is TSP a model for Social Security?
Bush cites Thrift Savings Plan as model for personal accounts
BY Florence Olsen
Published on Jun. 12, 2005
In his State of the Union address earlier this year, President Bush talked about using a portion of Social Security payroll taxes to create personal retirement accounts. He compared his proposal to the Thrift Savings Plan, a retirement benefit for federal employees.
The plan lets employees invest a portion of their paychecks in any one of five investment funds. "It's time to extend the same security and choice and ownership to young Americans," Bush said.
Little has been said about how the federal government would administer personal retirement accounts for tens of millions of Americans. Social Security Administration officials said it would be premature to comment. Likewise, Gary Amelio, executive director of the Federal Retirement Thrift Investment Board, which administers the Thrift Savings Plan, said he could speak only about it.
But some policy advisers insist that, despite differences, the plan is the administrative model behind some legislative proposals to change Social Security. So how do federal administrators manage personal accounts for 3.4 million employees?
The investment board administers the federal plan with a staff of 90 employees, most of whom are policy and oversight officials and some of whom are information systems employees. "We're running very efficiently," Amelio said.
The federal government has 130 payroll offices that remit employees' payroll contributions to the investment board, which handles recordkeeping internally. The board recently bought a new IBM mainframe, which has 10 times the capacity of the old one, to process and store all the personal account information, Amelio said. "I can tell you it looks like Darth Vader," he said.
Since 1986, when the Thrift Savings Plan was authorized by Congress and offered to federal employees, the Agriculture Department's National Finance Center in New Orleans has handled many back-office functions for the plan on a cost-recovery basis.
But as part of a three-year cost-cutting effort, Amelio said, this year the board will offer companies a chance to bid competitively on call centers and other back-office functions.
The federal retirement savings plan has among the lowest administrative costs of any defined contribution investment plan, Amelio said.
"We operate at about six basis points," he said, which means administrative costs are 60 cents per $1,000 invested.
"If you look at most defined contribution plans in this country, the average basis-point charge that the participants are paying is anywhere from 40 to 150 basis points," he said.
Compared with most companies' 401(k) plans, the federal plan is inexpensive to administer because it has a large volume of assets — $155 billion — and a high participation rate. About 3.4 million civilian and military employees contribute to personal accounts. With such large numbers, "you get economies of scale," Amelio said.
Other factors contribute to the plan's administrative efficiency. Of the five funds in which federal employees can invest, four are index funds. Investors typically pay no management fees for such funds because the investments match broad market indexes such as the S&P 500 for stocks or the Lehman Brothers Aggregate Bond Index. The federal statute that created the savings plan prohibits its administrators from offering more expensive funds that charge portfolio management fees.
"If we were to not use index funds or go out and use other exotic investments, it would drive our costs up 100 to 200 times," Amelio said.
Since 1986, Barclays Global Investors has won a succession of contracts from the board to execute federal employees' investment choices in the four index funds. Working with the Treasury Department, the board administers a fifth fund, the G or government fund, which lets employees invest their money in U.S. government securities.
"We're a daily plan, which means participants can move their money on any day that the markets are open," Amelio said. Federal employees can move their money into different funds by informing the plan administrator via the Thrift Savings Plan's Web site, a toll-free response line or a paper form.
"We're doing the bulk of our interfund trades now online," he said. "We do about a quarter of a million trades each month."
Amelio's pet project has been adding life cycle funds to the mix. He said those "funds of funds" combine the plan's five existing funds using an asset allocation model that corresponds to employees' retirement plans.
The life cycle funds, which the board will offer this summer, will give employees who expect to retire by 2010, 2020, 2030 or 2040 the option of choosing current retirement income or future investment income.
The funds will be rebalanced daily and reallocated quarterly so that they remain aligned with the funds' investment objectives, Amelio said.
The Thrift Savings Plan, with significant differences, is the model for Social Security legislation introduced by Rep. Paul Ryan (R-Wis.) and Sen. John Sununu (R-N.H.).
"That's the model, but there'll be a lot more people and more funds" and authority to pay contractors to do the accounting, said Peter Ferrara, a senior fellow at the business-oriented Institute for Policy Innovation and director of domestic policy for the Free Enterprise Fund.
Some policy-makers have adopted the Thrift Savings Plan as their model for Social Security personal retirement accounts.
Here are several facts about the retirement savings plan for federal employees:
- Annual administrative costs are less than $26 per participant.
- Plan assets are valued at about $155 billion.
- The annual budget for the board that administers the plan is $92 million.
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You can watch/listen to the whole C-Span interview here > http://tinyurl.com/8tmnz
It's worth it!
You can watch/listen to the whole C-Span interview here > http://tinyurl.com/8tmnz
It's worth it!
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Why FERS Absolutely, Positively Must Participate
Gary Amelio, the executive director of the Federal Retirement Thrift Investment Board, says that people under the CSRS should invest under the Thrift Savings Plan, but the majority of feds who are under FERS must do it. He says that's because "the plan doesn't offer the same level of benefits that the old CSRS system did, so this plan was intended to be a supplement. In addition to you contributions, you can get a match up to 5% on the first five percent of contributions." He adds "it's absolutely necessary. It's part of the three-legged stool for retirement that federal employees have: their defined benefit plan, TSP, and Social Security."
Why FERS Absolutely, Positively Must Participate
Gary Amelio, the executive director of the Federal Retirement Thrift Investment Board, says that people under the CSRS should invest under the Thrift Savings Plan, but the majority of feds who are under FERS must do it. He says that's because "the plan doesn't offer the same level of benefits that the old CSRS system did, so this plan was intended to be a supplement. In addition to you contributions, you can get a match up to 5% on the first five percent of contributions." He adds "it's absolutely necessary. It's part of the three-legged stool for retirement that federal employees have: their defined benefit plan, TSP, and Social Security."
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May 9, 2005: Guest: Gary Amelio, exec. dir., Federal Retirement Thrift Investment Board
http://audio.federalnewsradio.com/your_turn/050905.wma
He discusses the L-fund.
May 9, 2005: Guest: Gary Amelio, exec. dir., Federal Retirement Thrift Investment Board
http://audio.federalnewsradio.com/your_turn/050905.wma
He discusses the L-fund.
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greg wrote:
greg wrote:
Your first picture was very fattering. Thanks for the info.
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DMA wrote:
Yeah. After hearing him on C-Span and Causey's radio, I think he is a good, honest guy.
DMA wrote:
Yeah. After hearing him on C-Span and Causey's radio, I think he is a good, honest guy.
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I listened to both the Federal News radio program on the interview with Gary Amelio and the C-Span interview. I thought peeps might be interested in some of these statements that were made:
Federal News radio
We (TSP board) have tested and found there are only 142 participants that move funds more than twice a week and they lose money doing this. We do not feel we have a problem with frequent movers of funds. We call them "day traders."
We are not recommending to Congress the addition of a REITS Fund. The C and the S Funds already have Reits in them and we currently are the 13th largest holder of REITS in the country.
The L Funds will be ready for implementation in July or August.
C-Span
There are 3.4 million participants. Barclays in San Fransico won the last competitive bid to manage the 4 Funds for a 4 year period which will be re-bid next year. The G Fund is managed by the government. Congress selects the funds through statute and defines the broad-based indexes. The board monitors that the statutes are implemented and followed.
TSP expenses are paid 100% by the participants. The TSP is the world's cheapest legal investment.
By the end of 2005, it is anticipated that the administrative expenses for TSP will be .50 per $1000 invested or 5 basis points which is "netted out daily."
I listened to both the Federal News radio program on the interview with Gary Amelio and the C-Span interview. I thought peeps might be interested in some of these statements that were made:
Federal News radio
We (TSP board) have tested and found there are only 142 participants that move funds more than twice a week and they lose money doing this. We do not feel we have a problem with frequent movers of funds. We call them "day traders."
We are not recommending to Congress the addition of a REITS Fund. The C and the S Funds already have Reits in them and we currently are the 13th largest holder of REITS in the country.
The L Funds will be ready for implementation in July or August.
C-Span
There are 3.4 million participants. Barclays in San Fransico won the last competitive bid to manage the 4 Funds for a 4 year period which will be re-bid next year. The G Fund is managed by the government. Congress selects the funds through statute and defines the broad-based indexes. The board monitors that the statutes are implemented and followed.
TSP expenses are paid 100% by the participants. The TSP is the world's cheapest legal investment.
By the end of 2005, it is anticipated that the administrative expenses for TSP will be .50 per $1000 invested or 5 basis points which is "netted out daily."
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Wonder Woman wrote: I thought both of these were very informative. Mr. Amelio is very knowledgeable and keepsit interesting. Everyone new to TSP should listen to both them. The radio program explains the L-"fund" very well.
Greg
Wonder Woman wrote: I thought both of these were very informative. Mr. Amelio is very knowledgeable and keepsit interesting. Everyone new to TSP should listen to both them. The radio program explains the L-"fund" very well.
Greg
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Did he talk about the REIT fund?
Did he talk about the REIT fund?
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DMA wrote:
DMA wrote:
Like what WW said:"We are not recommending to Congress the addition of a REITS Fund. The C and the S Funds already have Reits in them and we currently are the 13th largest holder of REITS in the country. "
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I believethe Houseapproved it?
Once that happens I will be selling my REIT stocks "with both hands".
Thanks Greg.
I can not listen to that kind of stuff. I tend to fall offmy chair or smash my face into my keyboard. Zzzzzzzz
I believethe Houseapproved it?
Once that happens I will be selling my REIT stocks "with both hands".
Thanks Greg.
I can not listen to that kind of stuff. I tend to fall offmy chair or smash my face into my keyboard. Zzzzzzzz
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http://www.govexec.com/dailyfed/0405/042005d1.htm
I would say this guy is going to lose concerning the REIT fund.
Darn. No wonder REITS stocks are ramping. I guess I need to sell into them.
That is what a contrarian does.
http://www.govexec.com/dailyfed/0405/042005d1.htm
I would say this guy is going to lose concerning the REIT fund.
Darn. No wonder REITS stocks are ramping. I guess I need to sell into them.
That is what a contrarian does.
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This is an example of listening to the news and using it for your investments.
Good luck all!
This is an example of listening to the news and using it for your investments.
Good luck all!
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Attached is Gary Amelio's testimony to Congress on 6/14/05 in a zipped pdf file.
Attached is Gary Amelio's testimony to Congress on 6/14/05 in a zipped pdf file.
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Attached is Gary Amelio's testimony to Congress on 5/5/05 in a zipped pdf file.
Attached is Gary Amelio's testimony to Congress on 5/5/05 in a zipped pdf file.
Must be talk'n 'bout US!:!
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A lot of the mutual fund companies are tieing their investors hands by only allowing 4 transfer per year, as an example.
They do not realize they are forcing people to the ETFs.
I hope TSP does not go to a 2 transfer per quarter or 4 transfer per year type thing too.
I read the Vanguard board and they are a very unhappy group.
Basically limiting the investor is not to help the investor it is to keep their costs down while at the same time not dropping their management fees.
Within a decade there will probably not be mutual funds anymore at the rate they are going. There is a ETF for everything, their fees are lower and you can get out or inthem at ANY time. You are not tied to hoping the market will go up the whole day or down the whole day. With TSP you have to "guess" 28 hours plus out where the market will be. I am not that good at doing the 28 hour thing this time of year. Look at least week as an example. Tuesday retail sales horrible - short coverning. Thursday Philly Fed horrible - short coverning. The Short coverning caused the market to go up - that what happens in a bear market. Bad news is good news and good news like the PPI/CPI is bad news. Remember how the market was acting when the PPI/CPI came out? Spike on the rumour and sale on the news. But the talking heads do not tell you about the market under the market. Just this was a great week - actually no it was not a good week. It was a quad witch week and the market action is telling me we are at the top of the roller coaster and coming to the big dip down. Got your barf bags ready?
So when you hear me jabber about it is going to ramp at lunch and sell off at 1pm. I go long the morning and short at noon. Now I am short the whole stinky day.
Have a good trading week. I bailed out of my REITS. I believe interest rates are going up and the USD is going down and I fund may be the short term play here.
Will be watching Asian in 30 minutes to read the tea leaves as Spaf says.
BTW: Only 142? I guess I do not have to get started on gov data again??? Who is he trying to kid? :^ 142 that number is probably missing a zero at the end. The numbers they throw at us and we are SUPPOSE to believe it. :?
A lot of the mutual fund companies are tieing their investors hands by only allowing 4 transfer per year, as an example.
They do not realize they are forcing people to the ETFs.
I hope TSP does not go to a 2 transfer per quarter or 4 transfer per year type thing too.
I read the Vanguard board and they are a very unhappy group.
Basically limiting the investor is not to help the investor it is to keep their costs down while at the same time not dropping their management fees.
Within a decade there will probably not be mutual funds anymore at the rate they are going. There is a ETF for everything, their fees are lower and you can get out or inthem at ANY time. You are not tied to hoping the market will go up the whole day or down the whole day. With TSP you have to "guess" 28 hours plus out where the market will be. I am not that good at doing the 28 hour thing this time of year. Look at least week as an example. Tuesday retail sales horrible - short coverning. Thursday Philly Fed horrible - short coverning. The Short coverning caused the market to go up - that what happens in a bear market. Bad news is good news and good news like the PPI/CPI is bad news. Remember how the market was acting when the PPI/CPI came out? Spike on the rumour and sale on the news. But the talking heads do not tell you about the market under the market. Just this was a great week - actually no it was not a good week.
It was a quad witch week and the market action is telling me we are at the top of the roller coaster and coming to the big dip down. Got your barf bags ready? So when you hear me jabber about it is going to ramp at lunch and sell off at 1pm. I go long the morning and short at noon. Now I am short the whole stinky day
.Have a good trading week. I bailed out of my REITS. I believe interest rates are going up and the USD is going down and I fund may be the short term play here.
Will be watching Asian in 30 minutes to read the tea leaves as Spaf says.
BTW: Only 142? I guess I do not have to get started on gov data again??? Who is he trying to kid? :^ 142 that number is probably missing a zero at the end. The numbers they throw at us and we are SUPPOSE to believe it. :?
