Snowball effect

In the past eight weeks, the new automated record keeping system for the 401k-style Thrift Savings Plan has had to overcome several problems, including difficulties with Web and telephone access to the system and a backlog of paper applications.

While those problems were being worked out, approximately 9,000 of the 3 million TSP participants had problems completing such transactions as transferring funds, rolling over funds from other retirement accounts and repaying loans. Many of those affected wrote GovExec.com about their problems:

• "I submitted an application to withdraw money for a new home weeks ago…. I tried submitting online; their system wasn't working. I mailed in the application. They couldn't find it. I faxed in the application twice. My home closing was yesterday. We had to cancel and postpone because we lacked the down payment," one reader wrote.
• Another frustrated federal employee wrote: "My husband is active duty military and is currently deployed in Iraq. I mailed an application to receive a TSP loan on May 27, 2003. That application was returned to me about six weeks later, with a form indicating there was a new system, and that I had to complete another form and mail it in.

  After several weeks of trying to call the TSP service center I was told to fax the application. I faxed the application on July 11. I have been trying to call the service center every day since to check on the status of my loan.

  Today, I finally get through and talk with a service representative who informs me there still is no record of my loan application. [She] tells me to fax it to her and then allow seven to 10 weeks for it to be processed. This is unacceptable. I have already waited somewhat patiently for over two months. I am applying for the loan to cover a financial emergency, and I cannot afford to wait seven to 10 weeks. I need to have this application processed as soon as possible. Even under the old system, it did not take that long to process loans. I feel there should be an additional method to get applications processed while the bugs are worked out of the present system. I had seven to 10 weeks two months ago when I first sent in my application."

• "I had an emergency at home and needed another loan ASAP. Everything's gone wrong and without going into detail, it involved medical expenses, tuitions, car repairs. I don't have the money and it keeps adding on only because of the inability to get TSP to post my payoff and allow me to get a new loan. I've written to them, sent in comments on their Web site and all to no avail.

  The longer it lasts, the deeper in debt I am getting because I depended on that money, and not only am I not able to get a loan because they won't post my payoff, but I'm out the money I sent them in the first place to pay off the loan and to top it off, they are still taking out payroll deduction payments for the loan that's already been paid off. The TSP cashed my cashier's check on June 25.

  This has caused a lot of anxiety for me and hardship for my family. I can't even afford to pay my bills right now, or buy my medication because of the advance money I sent them from my paycheck to pay off a loan that's been in limbo without being posted, yet the check was cashed," wrote another GovExec.com reader.

Following a hearing before the House Government Reform Committee in July, members of the Federal Retirement Thrift Investment Board (FRTIB) decided to look into what, if anything, they should do in terms of reimbursing participants who lost money because of delays caused by the backlog.

FRTIB Executive Director Gary Amelio addressed this issue during the Aug. 18 board meeting.

"If a plan participant is harmed economically, we will review the situation, and if there are lost earnings due to the board, those earnings will be restored," Amelio said.

According to Amelio, one instance in which employees might be reimbursed involves a fund transfer or rollover where the participant filled out the forms correctly and in a timely fashion, but due to the paper backlog, the application wasn't processed and the participant was unable to earn interest on his or her money. Any TSP member who thinks this situation applies to them would need to contact the FRTIB to lodge a complaint, provide proof and allow the board to investigate the situation.

But consequential damages, such as those described by our readers, would not be covered. According to Amelio, this policy follows that of the private sector. "I'm unaware of any plan anywhere that is responsible for those kinds of damages," he said.