Here are the comment I got from one of my letters.
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Thank you for sending me your comments about the proposal by the Federal Retirement Thrift Investment Board (FRTIB) to reimpose limits on the numbers of free interfund transfers within the Thrift Savings Plan (TSP). I received comments from many people and am sending this one message to all since I will not be able to reply to each one individually.
Some of the people sending messages were under the impression that the Employees Thrift Advisory Council (ETAC) on which I serve has approval authority over proposals made by the FRTIB. That is not the case. As the name indicates, the ETAC members provide advice to the FRTIB and its Executive Director, Greg Long. At the ETAC meeting held Wednesday, December 19, 2007, the members discussed the proposals for limiting interfund transfers within the TSP after receiving a briefing by Tracey Ray, Chief Investment Officer, FRTIB.
Executive Director Long reminded the ETAC members that the FRTIB had not yet issued a formal proposal, that after publication of the proposal in the Federal register, possibly in January 2008, interested parties would have 30 days in which to submit comments. After considering the comments, the FRTIB would decide what action to take.
One of the pieces of information provided by Ms. Ray impressed me greatly. She reported that on Friday, October 19, 2007, about $271 million was transferred into the I-Fund by 2018 participants. On the following October 24, 2007, $291 million was transferred out by those participants. Thus they had a total profit of about $20 million in those five days. On the average, those 2018 participants had about $10,000 in profits at no cost to themselves. The transaction costs were borne by the other 3.8 million TSP account holders.
I reported on the ETAC meeting by email to Carol Bonosaro, President of the Senior Executives Association, shortly afterward. I expressed my concern about a different kind of trading scenario that would be very costly to the TSP. If participants in the I-fund withdrew a large amount before 4 pm on a Friday, a time after the international markets are closed, and some unexpected event occurred over the weekend to cause a large drop in international stock markets, the TSP would take a large loss in assets, not just a transaction cost. You can use your imagination about the diversity of possible events that could cause a large drop in international stock markets over a weekend.
Whether you oppose or support the idea of limiting interfund transfers in the TSP, I urge you to take the opportunity to send your comments on whatever specific proposal comes from the FRTIB.
Happy New Year.
Dick Strombotne
ETAC member
SEA nominee
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