Thrifty at the Thrift Plan

Thrift Savings Plan officials may lower the average cost assessed to investors, thanks to budget savings in fiscal 2004.

During a Monday meeting of the Federal Retirement Thrift Investment Board, Gary Amelio, TSP executive director, announced that the plan is on track to finish fiscal 2004 almost $4 million under budget. The Thrift board approved a $106.9 million for fiscal 2004, and the plan is projected to spend $103.2 million.

Amelio said the "incredible" savings were a result of "good management" and a reduction in the number of paper statements that are mailed to participants. Of the 3.2 million federal employees and retirees who participate in the plan, only 400,000 still receive paper statements. The rest receive their account information over the Internet.

With lower expenditures on the horizon, TSP officials said Monday that they are hoping to lower the "basis points" that the plan charges its participants. Basis points represent the average cost for investors. This year, the TSP is charging participants 11 basis points, or 11 cents for every $100 invested. That is high for the TSP, primarily because of the cost of a bungled computer modernization contract. The plan usually charges about 7 basis points. In a hearing last month, Sen. Peter Fitzgerald, R-Ill., said a comparable index fund in the private sector has an expense ratio of 63 basis points.

As the overall value of the TSP rises and the costs go down, the basis points for the TSP participants are expected to drop even further.

"I would love to get that number down to 6 basis points in the next two years," Amelio said.

Andrew Saul, the chairman of the Thrift board, applauded the savings, but said it was important to focus on quality.

"The priority still has got to be running a first-notch plan," he said.

TSP officials also are excited about saving more money in the fiscal 2005 budget, which is currently expected to be a little more than $91 million. Staff members said they might have to adjust that number slightly as they learn more about technology upgrades and the launch of the "life cycle" investment option.

"I'm hopeful not to take that number too much higher," Amelio said.