TSP expenses likely to rise next year

The Thrift Savings Plan so far this year is on track to stay under budget but in fiscal 2012 could see a jump in expenses, officials said Monday during a monthly Federal Retirement Thrift Investment Board meeting.

TSP Executive Director Greg Long during the meeting said he anticipates spending $131.5 million in fiscal 2011, about $0.3 million below the budget approved in October 2010 and supplemented in January to fund software testing tools. The board had failed to approve the agency's fiscal 2011 proposal in September and passed a flat budget one month later.

The TSP this year has scaled back several initiatives, such as a routine technology refresh at its data centers and the complete launch of an interactive DVD to provide a thorough introduction to TSP for recently enrolled participants. Funds are available for mailings to just 70,000 employees, Long said.

"The greatest flexibility in the budget is in communications," Long said. "We have to prioritize what it takes to keep the trains running."

The TSP's budget proposal for fiscal 2012 will increase 12 percent to $147.2 million, according to Long. Board members last fall were concerned about budget increases, citing rising costs and concerns about the current economic climate. They expressed similar hesitation on Monday.

Board Chairman Andrew Saul expressed concern about a nearly 50 percent budget increase since fiscal 2008 and said that TSP must begin prioritizing initiatives in advance of the next fiscal year. The board will meet in July to begin reviewing the fiscal 2012 proposal.

"You should make these choices before September," he said. "There will be a strategic change in how this place is run."

One significant cost for 2012 is the introduction of a Roth 401(k) plan, which would allow employees to invest income that already has been taxed and therefore would not be taxed upon withdrawal. Originally scheduled to launch in January 2012, the rollout will be pushed back several months to coincide with February participant statements, thus reducing mailing costs. The delay also will allow federal agencies additional time to make changes in payroll software systems.

The Roth option also will require changes to the TSP's accounting systems; additional training for participant services staff; updates to the agency's website and forms; and education tools for plan participants.

Other expected new costs include a $7.8 million increase in record-keeping activities, including a refresh in hardware and software; a $2.7 million boost in personnel costs; and a $4.0 million jump in operation expenses associated with the agency's move to a new office.