TSP board to limit interfund transfers

[offtrack]

James I've pretty much avoided talking on ift trade limits till now since there is legitimacy in TSP's complaint concerning I fund. My thought is that IF we are to have limits, than we ought to have the IN SERVICE liberty of being able to transfer our retirement funds (or at least our contributions) in and out of TSP to an IRA much the same way as I can tranfer my no fee IRA from Scotttrade to Fidelity. Have you asked about that option?

 

[James48843]

The option to make a one-time in-service transfer OUT to a Roth, regular IRA or 401(k) is now available if you check the TSP website.

It is only availble to those already retired or seperated from the government. It is NOT available to anyone still working.

Which then leads to the question- is it worth the risk to quit the Agency simply to be able to move your money to safety and run it up in the market instead. How sure are you that you can equal your salary and benefits by trading the balance that you now have, instead of working for a living?

It's temping- but my balance isn't quite enough to do that- yet.

 

[James48843]

Anidoc: see question number 2:

Q2. Under what circumstances may I transfer money from my TSP account to a Roth IRA?

First, you must be eligible to withdraw your TSP account, and your payment must be an eligible rollover distribution.

Consequently, you must be eligible for an age-based in-service withdrawal or a post-separation withdrawal.

Once you’re eligible to withdraw your TSP account and you determine that your payment is an eligible rollover distribution, you must determine whether you meet the eligibility requirements for a transfer directly to a Roth IRA.

Specifically, you are not eligible to transfer your payment to a Roth IRA if either of the following conditions applies:
(1) Your modified adjusted gross income is over $100,000; or
(2) You are married and file a separate return.
Otherwise, any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA.

 

[offtrack]

The option to make a one-time in-service transfer OUT to a Roth, regular IRA or 401(k) is now available if you check the TSP website.

Not what I am talking about here. I'm looking at direct transfers in and out of TSP to privately managed accounts in the same manner as I can shift an IRA from caretaker to caretaker. A small administrative fee might be involved and there might be minimum time limits concerning transfers, but at least an employee would have the option of controlling funds.

 

[sdouglas3]

I read the 5 page report and where they talk about the long term holders vs. the folks that move in and out of the I-Fund. The report said this "causes more risk for the buy and holders" but they do not quantify the risk. In my mid what risk are they referring to? If it's market risk then thats spread across the board for everybody. My thoughts are the risk they are referring to are internal TSP risk. Which is having to pool more money to cover the folks that have interfund transfers. Also, they quoted a 1.5 billion dollar transaction day in Oct 07. This number was put in there to make it sound gigantic. But, in fact they trade billions of dollars across teh funds everyday. My point is that part of the report was spun to make the interfund transactions and people who initiated them cause increased risk to the I-Fund and it's buy and hold crowd and does not quantify what risk is.

 

[easting]

A one-time in-service (still working) withdrawal is available to those 59-1/2 or older. It's on the website and in the leaflets.

That's 22 years out from now for me. I have a pile already in the TSP. If the limits are imposed, my plan is to drop to 5% for the match, put it in G, then take the rest of my contribution money to some other provider who has some flexibility.

 

[offtrack]

If they have a problem with us moving in and out of the I Fund, do you really think they will ever allow this?

Absolutely. this is probably the best time to lay groundwork for the option to make in service direct transfers between Tsp and private administrated plans. take a look at a TSP-60 TSP-75 and TSP-77 forms. New hires are eligible to make direct transfers from regular IRA or employer eligible to TSP w/o incurring 20% IRS withholding. Age 59 1/2 are eligible to make direct transfers to regular IRA. And post service can direct transfer to regular IRA and employer eligible.

TSP just limited transfers citing that limited transfers are standard in FOR PROFIT employer eligible private plans. Seems to me if you are going to compare yourself to a private FOR PROFIT plan provider, you are going to have to open up the option for participants to choose a plan provider competitively. They've already argued that only a small percentage of "day traders" would advantage themselves of such a plan option.

Also TSP has loosened the borrowing option. If we continue into recession with the high spread in interest rates, I'd suspect irresponsible borrowing to increase from TSP.

IMO to shut us up they'd make the deal rather than expose themselves to the potential criticism from savvy investors they would be subject to if this market goes big time bad.

 

[RAE]

Here is what Tracey Ray had to say about the C, F, S and I Fund transaction costs in her letter to the FRTIB dated November 6, 2007:

View attachment 3514

In Tracey Ray's own words:

• C Fund stocks are very liquid.
• F Fund bonds are very liquid.
• BGI uses an optimization program for the S Fund and therefore does not own the most illiquid stocks, which are harder to trade.
• The C, F, and S Fund trades are executed before the markets close or on the close, so BGI is generally able to buy or sell those stocks and bonds for the closing price.
• Trades in the I Fund, however, pose a unique challenge...In 2006, trading cost the I Fund 8 basis points ($13.8 million) of return...We never know whether trading costs will be positive or negative...Further, we cannot control these costs other than to seek to lessen our exposure by minimizing the size of daily trades.

In her own words, Tracey tells us that the C, F and S Funds are very liquid and that transactions can be executed on the close for the closing price. Only the I Fund transactions pose a unique challenge, and the only way to control the I Fund transaction costs is to minimize the size of daily transactions in the I Fund.

Tracey Ray has already stated in writing to the FRTIB that the C, F and S Funds are not a problem, but that the problem lies with the I Fund transactions. Therefore, there is absolutely no reason to limit daily interfund transfers to the C, F and S Funds.

Reference Tracey Ray's own words in her letter dated November 6, 2007 (see link below) when you make your comments to the FRTIB. There may be similar comments in the FRTIB minutes or other published documents, interviews, etc. but I haven't looked for those yet. Please let us know if you find any other published statements and/or data by Tracey Ray or the FRTIB which indicate that the C, F and S Fund transactions are not the cause of the problem.
http://tsp.gov/faq/faq14_frequent-trading-memo.pdf

Well, I'm not willing to give up on unlimited IFTs in the I fund, guys. It seems everyone is willing to concede that the I fund is the problem here, when total expenses for the I fund in 2006 were only 8 basis points in 2006, and only 6.2 basis points in 2007 (through November). These are hardly exorbitant expenses, folks. Factor that in with the rest of the TSP funds, and total basis points for all TSP funds are still around 3, and dropping every year, as the amount of money under management increases (Greg Long admits this). In a few years (or less) it will be 2 basis points. Is it worth 3 bucks per year (and change) to you to be able to make unlimited IFTS in ALL of the TSP funds? And probably 2 bucks per year in a few years? It certainly is to me. I am not conceding anything in my comments to FRTIB. They have not proven their case that trading expenses for ANY of the TSP funds justify the restrictions they are proposing. Use the comprehensive data that James has put together for us on tspshareholder.org to refute the highly selective data FRTIB uses in their Proposed Rule.

 

[James48843]

Note:

I just received the fax back from Megan with the data on December's trading costs. I'll be able to write up something tonight- but suffice it to say that F, C and S costs were minimal. Once again the I fund is the expensive one.

If anyone out there is still IFT'ing in and out of I, then PLEASE use C or S instead.

Costs for IFT's in december:

F Fund: $35,282 1 basis point.

C fund: $97,845 1.1 basis points.

S Fund: $-23.574 -0.4 basis points (Yes, negative trading costs for S )

I Fund: $759,987 5.8 basis points.


Folks- it is mighty hard to fight this fight- but the "I" is the issue for them, and it's hard to argue that. They claim they don't know why we would use "I" fund. Everyone here knows it's because you can get larger swings in the "I", but they don't care about that.

For the year, here are some numbers to think about:


F- $8,735,859,214 traded.
Cost for the year for all trades: $1,085,881 1.2 basis points.


C - $11,118,101,427
Cost for the year for all trades: $605,434 0.5 basis points

S- $13,693,147,225
Cost for the year for all trades: $ -4,324,671 -3.2 basis points
(yes, that's a NEGATIVE trading cost of four milion dollars to trade 13 BILLION dollars over the year )


I- $26,732,802,960

Cost for the year for all trades: $16,513,454 , or 6.2 basis points.



Cost for trading the " I" is twelve times the cost for the year, basis points wise, the cost for trading the "C".

Just food for thought.

To repeat what I wrote earlier today-

These are the full year's numbers, including December.

In the full year of 2007 (jan to december inclusive) the total costs for ALL trading activity in all funds was $13,880,098

The total number of TSP shareholders at the end of the year was about 3.9 million. I don't have that exact number yet, but it's close.

Note: The "I" fund is the only one with significant expenses.

Note 2: The total amount of trading cost, per TSP shareholder, is actually LESS that it was last year. Tracey Ray was claiming in October that they HAD to stop IFT's, because of a a 70% increase in costs.

The truth is costs overall did NOT go up anything close to that. Costs per person actually went DOWN.

 

[James48843]

Comparing years:

2007- January through December

F- Amount traded over the year: $8,735,859,214
Cost for the year for all trades: $1,085,881 1.2 basis points.


C - Amount traded over the year: $11,118,101,427
Cost for the year for all trades: $605,434 0.5 basis points

S- Amount tradaed over the year: $13,693,147,225
Cost for the year for all trades: $ -4,324,671 -3.2 basis points
(yes, that's a NEGATIVE trading cost of four million dollars to trade 13 BILLION dollars over the year )


I- Amount traded over the year: $26,732,802,960

Cost for the year for I fund trades: $16,513,454 , or 6.2 basis points.



Total combined costs for ALL trading in 2007:
F+C+S+I= $13,880,098

Total number of TSP Shareholders in 2007: 3,900,000
Cost per TSP Shareholder for all trading in 2007: $3.55


Prior year:

2006- January thru December

F Fund:
Amount traded: $2,389,469,901
Cost for the year for all trades: $234,658 or 1.0 basis points.

C Fund:
Amount traded: $ 7,954, 599,207
Cost for the year for all trades in 2006: $ - 27,387 or -0.003 basis point


S Fund:
Amount traded: $ 6,086,286,346
Cost for the year for all trades: $ 1, 154,212 or 1.9 basis points


I Fund:
Amount trades: $ 12,306,380,288
Cost for the year for all trades: $ 13,867, 759 or 11.3 basis points.


Total trading costs For ALL trades in 2006:
F+C+S+I= $15,229,242



Total number of TSP Participants in 2006= 3,680,000

Cost per TSP Shareholder for all trading in 2006: $4.13

So....how much did costs go up from all those "Daytraders?"

Answer: IT DIDN'T COST MORE.

View attachment 3517​

​

IT COST 58 cents LESS per person in 2007 than it did in 2006.

 

[James48843]

Anidoc- go check back through the September and October board meeting minutes, and the presentation she gave when she told them costs were through the roof. I'm not sure exactly which document it was in, but it was there- I remember the quote of costs going up 70%. Go help me and find it.

The January board minutes are now on-line at the FTRIB electronic reading room. I'm reading them now, and extracting data.

Thanks for the help.

 

[tsptalk]

Has this from the Dallas News been posted yet?

"At the far extreme of low costs, there is the federal Thrift Savings Plan. It runs at a barely measurable cost – 3 basis points. That's 0.03 percent."

 

[James48843]

Yes, we saw that wording a day or two ago- it was originally written by a guy out of DC named Graff, not the guy here in Dallas's article. I thnk the Dallas guy has plagerised that article.

But that is ok- we'll figure out how to use it.

 

[James48843]

It may also have been either a written article in one of the publications, or a radio interview. I just can't remember. I looked last night at the October and Novmber minutes, and the powerpoint presenation, and can't find exactly where she said it was 70% increase. I KNOW it was said somewhere, I just can't find the exact place/quote.

P.S.- Thrift Savings Plan people ARE monitoring this message board. (Hi Megan!). So if you want to tell me something you don't want them to know, please P.M. me.

thanks

 

[RAE]

All I'm saying is that Tracey Ray has already admitted that C, F and S are not the cause of the "alleged" problem that she brought to the FRTIB's attention in her letter dated November 6, 2007. Therefore, she has no basis for proposing to restrict interfund transfers to C, F and S in order to solve the "alleged" problem of increased interfund transaction expenses related to the I-Fund. If the FRTIB truly believes that it needs to restrict interfund transfers to two per month, then that should apply ONLY to the I-Fund and NOT to the C, F and S.

James asked for options, and I simply pointed out that FRTIB is already on record stating that it believes the problem lies with the I-Fund and not with the C, F and S. Under that premise, FRTIB has no justification for limiting interfund transfers to the very liquid C, F and S. This is an argument that we should be able to win.

A unified voice means that everyone writes comments in support of a single option to the current FRTIB proposal. In my own case, since I like to use DCA strategies to enter/exit the stock funds as the price falls/rises, I could live with daily IFT capability in the C, F and S while making transfers less often in and out of the "problematic" I-Fund with its associated FV baggage. What option do you support?

Paladin - yes, I agree with you (that FRTIB has not made any case that IFTs
for the C,S, and F funds are creating any problem at all with transactions
costs). My point, though, is that I also do not believe FRTIB has made
their case that transaction costs for the I fund are ENOUGH of a problem to
justify such harsh restrictions on making IFTs for the I fund, either.
James' data indicates that TOTAL IFT costs for all funds for 2007 under the
current rules (unlimited IFTs for all funds), costs each TSP participant
only $3.55 per year. That's down from $4.15 in 2006. And, Greg Long
admits that as the total assets under management increases, these costs
will continue to drop further. So, what exactly is the problem here? I
don't know about you, but retaining the right to make unlimited IFTs in all
funds is worth 3 bucks and change per year. Yes, the I fund appears to be
the one that has the highest IFT costs, but still, when you look at the big
picture, these overall cost for administering all of TSP is miniscule, by
any measure they want to use. So, my comments will reflect my belief that
they have not yet made a case to impose their proposed new IFT restrictions
on ANY of the funds - especially when you consider how harsh the proposed
restrictions are, in an attempt to save about 3 bucks per year per TSP
member! That is ludicrous. ALSO - there is no discussion whatsoever in
the Proposed Rule about the L funds. Why should we agree to give up
anything we have now, when they haven't even told us how much it costs to
rebalance millions of L fund accounts, EVERY DAY?

I understand the desire to respond to this as one unified voice, but I was just expressing my opinion that perhaps we should not concede anything here, because FRTIB has not made their case that there is any problem large enough to warrant a restriction to 3 IFTs per month.

 

[James48843]

ok- thanks.


P.s.- TO ALL WHO READ THIS:

Many of you are writing on this message board your ideas or objections, or both.

Do me a favor:

Each and every time you make a post here,

PRINT THE PAGE WITH YOUR COMMENT- (not everyone elses, just yours) and then

FAX THAT IN TO THE THRIFT BOARD AS A COMMENT.

You'll load up the register with comments in opposition in a short time.

One post= one federal register comment faxed in.

Be sure to put your name and info on the fax.


See how easy this can be?

 

[James48843]

Yes, Paladin- please throw out any other optiosn you can think of.

Tom and I have been talking about doing a POLL on-line, to ask people their order of preference on options to propose, in unison, to the board. Tom asked me to come up with a list of options, and the pluses and minuses of each. Almost exactly like you started out with your list of 1 through 5, but with a summary of the costs and rewrds of each option.

Can you think of any other options?

I am working the anaysys of most of those now- need help with more ideas.

Please post ideas.

thanks
jim

 

[James48843]

Note:

Mike Causey responded to the press release this morning. He's the only one so far who has published.

the good news is that TSPSHAREHOLDER is the link for his readers to get to the federal register notice. TSP hasn't put it up on their site yet. We've gotten about 20 news signatures on the petition today as a result. Every little bit helps.

Here is the short blurb that Causey printed:


From: Federalnewsradio.com
at: http://federalnewsradio.com/index.php?nid=7



TSP Trading Limits

The Federal Retirement Thrift Investment Board has contacted roughly 3,000 federal-postal workers who are considered "frequent traders." These are people who move in and out of TSP funds several times a month (and in come cases a couple of times each week). The frequent traders have been told that in the near future they will be limited to two electronic trades per month. Anything beyond that will have to be done via snail mail.
Some traders think the government is inhibiting them from using their own money in an attempt to make money. Others believe it is the Nanny State at its worst. Meantime the board has published the proposed new trade limit rules. To check them out click here.
=================================

that's it.

 

[tsptalk]

Many of you are writing on this message board your ideas or objections, or both.

Do me a favor:

Each and every time you make a post here,

PRINT THE PAGE WITH YOUR COMMENT- (not everyone elses, just yours) and then

FAX THAT IN TO THE THRIFT BOARD AS A COMMENT.

Comments may be sent to Thomas K. Emswiler, General Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 20005. The Agency"s Fax number is (202) 942-1676.

 

[James48843]

I think I found it. This is the ONLY thing I can find with any reference to 70% of anything. To get directly to the memo you have to paste the link into your browser, otherwise it just takes you to tsp.gov.

http://tsp.gov/faq/faq14_frequent-trading-memo.pdf

OK- thanks. I read what is there regarding that number. That isn't what I thought it was, but may in fact be what I saw that I read differently.

Anyway, good find. Because it jostled a few brain cells for me.

One thing I notice in here, that may be another alternative to think about, is to delay the release of I fund IFT's (only I fund) for a longer period of time- i.e. a 1 extra day to clear, as a possible other alternative. I need to think about it, mull it over, and then try to run numbers on what that might do as an alternative, to see if it's worth putting on the possible list of considerations.

In short, that document tells me the "lost interest" runs about 1.8 million, as an opportunity cost. Again, that's peanutes, but a day delay on releasing the funds would eliminate the vast majority of those costs as well.

In short- it looks like , of the 13 million in trading costs, if my calculations are right, about 11 million can be eliminated simply by changing the valuation of the fund from 7 p.n. until 7 a.m. the following moring, and an additional 1 million or more can be saved if they delayed THAT money from being available to be IFT's again for a 24 hour waiting period.

It's something to mull over, anyway.

I am leaning towards writing a recommendation strictly to change the valuation time to 7.a.m. the following morning, which allows for the 11 million or so to be saved. It doesn't cost the 100,000 investment, it puts the costs of the I back in line with the other funds, and it's nearly cost free to implement.

Anyway, that's where my thoughts are at the moment.

As to the person who said that each petition signature should be printed out and submitted one at a time- .....guess what I plan to do for the last week of March? A week of all-nighters. I hope they fill thier fax machine with paper and keep it full....