I guess this info has already been published but in case there are others out there like me that thought there was a plan by TSP board members for a Thrift Board meeting in December to bring up the issue of Thrift IFT limits, that is not going to happen. It has already happened according to this article in the Washingtonpost dated 11/20/2007.
Already a done deal - meeting was on 11/19/2007. No minutes on the frtb web site. What happened to our freedom to know what real evidence they are using except some overblown statements that don't add up?
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Thrift Savings Plan Approves Trading Restrictions
from:
http://www.washingpost.com (may need to register to view this)
By Stephen Barr
Tuesday, November 20, 2007; Page D04
Alarmed by a surge in stock and bond trading by a small group of government employees, the board that oversees the Thrift Savings Plan voted yesterday for a crackdown on participants who try to beat the market by jumping in and out of the plan every few days.
The day traders or market timers, as these employees are popularly called, have been driving up the plan's operating costs for all TSP participants, plan officials said.
Out of a plan with more than 3.8 million members, fewer than 3,000 government employees are responsible for much of the increased trading volume, the officials said.
"It is real," Gregory T. Long, executive director of the Federal Retirement Thrift Investment Board, said. "A small group of people are causing damage to hundreds of thousands who don't do this."
The TSP is a 401(k)-type retirement savings program for civil service, postal and military personnel. It features three stock index funds, a bond index fund, and a U.S. Treasury securities fund. The index funds essentially produce returns that track domestic and international market trends. The plan also offers "life-cycle funds," targeted for retirement purposes, that are a mix of the index funds and the government securities fund.
Congress designed the 20-year-old plan on the theory that employees would buy and hold stocks and bonds for the long term, building a nest egg for retirement. The plan began providing daily, rather than monthly, valuation of participant accounts in 2003, when officials upgraded the TSP's record-keeping system.
The switch to daily valuation has made it much easier for some federal employees to use the TSP as a buy-and-sell stock machine, apparently in hopes of reaping bigger returns.
In the change to the daily system, the TSP did not place a limit on the number of transfers among its funds. In contrast, officials noted yesterday, most mutual funds restrict the number of trades their members can make each year. Some mutual fund companies also charge redemption fees for shares held less than 30, 60 or 90 days.
Officials said trading volume in stock and bond funds in the TSP has grown substantially since 2005 and has expanded disproportionately to market value. More large trades also are taking place, they said.
For example, on Oct. 19, $371 million of the plan's assets were transferred into an international stock fund. Three business days later, on Oct. 24, $391 million was transferred out. Officials said 2,018 participants who sold their international stock on the 24th had purchased the stock on the 19th.
Of that group, 323 were trading $250,000 or more. During the previous 60 days, these 323 traders had made 5,804 exchanges in the international fund worth $1.9 billion, the TSP officials said.
The daily trading, and the size of the trades, have led to higher broker fees and transaction costs, especially in the international fund, where it's more difficult for the TSP's investment manager to match buy and sell orders, a study by the TSP staff found.
Thrift Savings Plan Approves Trading Restrictions
Citing its duty to administer the TSP at the lowest reasonable cost, the thrift board voted to adopt trading restrictions for all of the plan's funds.
The policy limits participants to two inter-fund transfers per month. Participants who think they have made an investment mistake would be allowed an additional transfer into the plan's risk-free government's securities fund.
Tracey A. Ray, the TSP's chief investment officer, said the policy change would be announced in February and that the plan's computers would be reprogrammed by March or April to enforce the new policy.
In the interim, Ray was granted permission by the board to identify the 2,000 to 3,000 frequent traders and to ask them to stop. If they do not, they will be allowed to buy and sell only through the mail until the new, automated curbs take effect. Because it will be difficult for the traders to know when their mail order is delivered, they are likely to be less eager to try to take advantage of market swings.
The TSP began studying trading patterns during the summer, and officials said the analysis was not intended to determine whether the market timers were making or losing money but to determine whether their trading had increased commissions paid to brokers, transfer taxes and other transaction costs.
The study focused on the TSP's international index fund, the most costly fund to administer because of the lag time in buying and selling in overseas markets. The study found that 70 to 80 percent of the daily trading volume came from participants making a "round trip" -- selling their stocks after having purchased them within the past 60 days.
Long said yesterday that frequent traders "won't be happy" to see curbs imposed on trading. "They will complain loudly, but our job is to take care of all participants," he said.
Stephen Barr's e-mail address
isbarrs@washpost.com.
