As Wall Street scrambles, TSP plans for upgrades and emergencies

The Federal Retirement Thrift Investment Board expects the Thrift Savings Plan's costs to remain low next year even as systems modernization and communications efforts continue. The board also is crafting a continuity of operations plan to keep the TSP running in the event of a firm collapse, or the firing of an investment manager.

"You're running this place for basically the same [budget] you ran it for six years ago, and that includes spending money on new systems and new hardware," Board Chairman Andrew Saul said of the plan to request a budget of $114.5 million for fiscal 2009. "Deeper management bench, two call centers, it's a totally different operation… . It's not us. I think the senior staff deserves the credit."

That proposed budget includes $85.8 million for systems support, security, call centers and record-keeping; $6.3 million for communications, including release of a TSP education DVD originally scheduled for fiscal 2008; $12.9 million for pay and benefits for staff; and $9.4 million for rent, information technology updates, a participant survey and redesign of the TSP Web site. Board members also discussed Wall Street's tumultuous weekend. Interfund transfers continued to fall in August, hitting a low of 67,910. But Tracey Ray, TSP's chief investment officer, said large losses likely to hit the stock market Monday could prompt a higher rate of transfers into the government securities fund, considered the most stable of the plan's offerings. Investment firm Lehman Brothers filed for bankruptcy Monday while Bank of America bought Merrill Lynch. Both developments have caused turmoil in the market.

Gregory Long, TSP's executive director, said he hoped participants would keep at least some of their money in equity funds. "We do continue to reinforce the message that if you have a long-term goal, you should have long-term plans," he said.

Board member Alejandro Sanchez noted that plan participants actually could benefit by buying equity funds when their value is low as long as they were prepared to wait out the current downturn for their investment to increase in value.

The churning on Wall Street may have provided some of the incentive for a request the board members made on Aug. 18, when they asked Long to prepare a memo on what the TSP's contingency plan would be if an emergency made it necessary to withdraw plan funds out of Barclays Global Investors and transfer them elsewhere.

Long concluded that the best approach would be to convene a special board meeting to approve a request to immediately transfer the funds to a new manager and to negotiate a sole-source contract with a new manager.

"There would be some systems changes, but we would be able to manually do, for an indefinite period, what we do systematically today so there would be no impact to the participants," Long said. "What this says is we're planning for an unlikely event, but it's still prudent to plan."