TSP board delays new computer system again

A new computer system that would give federal employees more control over their 401k-style Thrift Savings Plan accounts won't be ready until November, the TSP board announced Tuesday. The announcement marked the fifth time in two years that the computer modernization schedule has slipped. The board had previously announced that the new system would be up and running in September. TSP officials said the new system is fully developed, but testing has fallen behind because it took longer than expected to convert TSP participants' records to the new system. Contractors are testing the records to make sure they were completely and accurately converted, TSP officials said. "Although data conversion is expected soon to be validated, the compression caused by its delay dictates an adjustment to our implementation schedule to accommodate parallel testing," said TSP Executive Director Roger Mehle. Parallel testing will make sure the new system can handle the TSP's high volume and complexity of transactions. About 3 million civilian and military participants have about $100 billion invested in the TSP. "We will make a transition to the new … system only when we are completely satisfied of its reliability," Mehle said. The TSP board hired Fairfax, Va.-based American Management Systems to modernize the TSP computer system in 1997. After four years, four schedule slippages and a tripling of the cost estimate for the system, the TSP board fired AMS. The board and AMS are locked in a legal battle over the failed contract and the $50 million that the board paid to AMS. The board in July 2001 handed the contract over to Alexandria, Va.-based Materials, Communication & Computers, Inc., which has led a team of subcontractors to develop the system for about $22 million. When the new system is completed, TSP officials say it will allow for daily valuation of accounts and daily processing of transactions, much like private-sector 401k programs do. Currently, the value of TSP accounts is updated monthly rather than daily, and some transactions take several weeks to process. The new system would also show account balances in shares as well as dollars, offer more ways for participants to withdraw money and provide online service for loans and withdrawals. The delay in the new system comes after about two and a half years of poor performance for the TSP's most popular investment option. The C Fund, which invests in common stocks, dropped about 9 percent in 2000, 12 percent in 2001 and has had negative returns in six of the past seven months. Before the recent decline, the C Fund posted double-digit gains for five years running.