Cost of administering the TSP to increase in 2010

The board overseeing the Thrift Savings Plan on Thursday voted to increase the federal retirement program's budget about 14 percent next year, partly to pay for implementation of automatic enrollment and other changes mandated by a law enacted in June.

During a meeting, the Federal Retirement Thrift Investment Board agreed to raise the TSP's administrative budget to $130.3 million for fiscal 2010, a 14 percent increase over the $114.5 million approved for the fiscal year ending Sept. 30. The increase would be even greater -- nearly 19 percent -- if compared with the $109.7 million the TSP anticipates spending in fiscal 2009.

Listening in to the meeting on a speaker phone from Florida, board member Alejandro Sanchez questioned whether such an increase is appropriate in today's economic climate. "We need to reflect reality," he said. "In the private sector, nobody's going up 20 percent. Not even 3 percent. Here in Florida, most of the local governments are cutting back. We can't get used to this, if the tough times continue."

Sanchez left the call before the vote, but said he would have voted in favor of the budget, as long as future increases are kept in check. The budget passed unanimously among the remaining board members.

TSP Director Gregory Long noted that the plan still had the lowest overhead costs of any similar financial organization -- even those with comparable levels of investments. "I think we have an extraordinary record of achievement," he said.

The increase includes money for 13 new hires and for communications to participants, but the bulk of the additional funding would be for record-keeping activities, including call center upgrades and support software, new tracking systems and software to process Internal Revenue Service forms. In total, the TSP plans to spend $13.3 million more for record keeping in fiscal 2010 than it did in fiscal 2009, according to Long's memorandum to the board.

Some of the technical enhancements are linked to reforms mandated as part of a broader June tobacco law. For instance, the new system for processing IRS forms will make the introduction of a Roth option -- in which participants make after-tax contributions to their savings -- less labor-intensive, Long said.

While a vote is not yet required, Long also outlined plans for the fiscal 2011 budget. He projected the TSP will require a smaller increase of $5.6 million in fiscal 2011, bringing the total budget to $135.9 million.