Thrift Roundup

The Thrift Savings Plan finished fiscal 2004 under budget, and Executive Director Gary Amelio hopes to replicate those cost-cutting measures in fiscal 2005.

Speaking to members of the Employee Thrift Advisory Council Tuesday, Amelio said the rapidly growing plan-and decreasing costs-are reducing the fee for every participant. The TSP, which operates as a 401(k)-style retirement resource for federal employees, has 3.3 million participants and more than $140 billion in assets. The per capita cost to run and maintain retirement plans is generally calculated in "basis points," which represents one cent for every $100 invested. Typically, the TSP costs participants about 7 basis points, far lower than the cost for private sector plans. Recently, Thrift officials have been forced to charge higher rates to compensate for the cost of a botched computer modernization contract. This year, however, the TSP finished at 6.5 basis points.

Amelio said the cost-cutting is not over. He aims to cut more than a basis point over the next year.

"I've been saying 5 [basis points] in '05," he said.

Amelio says increased efficiency is the main cause for the reduced cost.

"It's amazing how much money we are saving," he said.

Specifically, he cited the reduction of paperwork that has accompanied expansion of online transactions. A significant reduction in the number of loans also has reduced transactions, and costs.

The plan also is saving through the operation of a parallel call center in Maryland, he said. All TSP calls previously were sent to the National Finance Center in New Orleans, which is part of the Agriculture Department. Thrift officials wanted a second facility outside of hurricane range. Their theory was validated this summer-shortly after the second call center opened-when the National Finance Center was evacuated for Hurricane Ivan.

Amelio told council members, however, that one of the most significant benefits is the reduced costs at the privately run center. It handles half the Thrift plan call load with less than half the operators who work at the NFC, he said.

Some federal employees have expressed concern about their retirement accounts being handled by private contractors who have not been screened. Amelio, though, expressed confidence in the operation, and praised its effectiveness.

Thrift officials realize that military participation in the retirement plan will probably not catch up to the civilian rate of 87 percent, but said they will work to boost numbers. The military joined the Thrift plan later than the rest of the federal government, and almost 19 percent of uniformed personnel now take part.

Large numbers of incoming and departing personnel mean that TSP participation will permanently be kept down, according to Carl Witschonke, the deputy director of compensation at the Office of the Assistant Defense Secretary for Personnel Policy. He also is a member of the advisory council. He pointed out that Defense brings in 200,000 new personnel each year as another 200,000 leave.

Amelio also said that military personnel are mostly younger than federal employees, and may be less likely to be planning for retirement.

"We are going to focus on those folks who are making a career," he said.

Between September to October 2004 TSP participation rose in the Navy and Marine Corps, but fell in the Army, Air Force and Coast Guard. The Navy, which led the push for military inclusion in the plan, has the highest participation, at 40 percent.