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Hurricane Katrina has spurred an outsourcing of Thrift Savings Plan support functions to happen faster than originally planned, leaving only upper-tier policy and financial jobs filled by federal employees.

The National Finance Center, an Agriculture Department facility located in New Orleans, resigned its remaining duties for the TSP ahead of schedule because the hurricane left the facility understaffed and in poor physical shape.

The TSP board, which administers the $180 billion 401(k)-style retirement savings plan for millions of federal employees, announced Tuesday at a meeting that it granted SI International a sole-source, rushed contract to take over duties held by employees at the NFC as of June 9. The one-year contract was not subject to the normal competitive bidding process because of its emergency nature.

The board already has moved toward contracting out the roughly 500 positions that were once held by NFC staff, to save money. Fewer than 100 federal employees remain in TSP-related jobs at the NFC, many of them in accounting positions.

In the past, NFC employees also processed forms for options including rollovers and withdrawals, operated call centers to answer participant questions and coordinated the plan with agencies' payrolls.

"I am very much in a comfort zone that nothing will fall through the cracks," TSP Executive Director Gary Amelio said. "Our costs will go down ... I think significantly."

In part because of the outsourcing, the plan's budget, which comes directly out of participants' investments, is shrinking. It has fallen from $101.5 million in fiscal 2004 to a projected $76.8 million for fiscal 2007.

Those costs, at around four basis points, are widely known to be the lowest among government-sponsored and privately run 401(k) plans.

"This is the last step in divorcing ourselves from the NFC," TSP Board Chairman Andrew Saul said. "It is hopefully getting a better product for our participants."

Saul said at the meeting that low administrative costs are especially important to investors when the markets are yielding smaller gains.

SI International already runs a call center in Clintwood, Va., that handles functions previously performed by the NFC.

TSP officials said the NFC's resignation sped up the privatization of the remaining work by at least a year. It also had the effect of increasing automated processes in the TSP, among them the processing of death benefits.

"When you put in a new process, you take a look at it," said Pamela-Jeanne Moran, director of TSP benefit services.

By the end of the week, the TSP Web site will be updated with new addresses and phone numbers and revised forms to reflect the change, officials said.

COMMENTS

• I don't understand why anyone would expect the level of service to improve with the TSP support contracted out. In my experience with the many functions that have been outsourced is that, invariably, the level and quality of service declines when it is contracted out. The process starts with the assumption that any function that is being outsourced is overstaffed by a minimum of 25 percent. A 50 percent overstaff assumption is not unusual. My preference would be that my money and services continue to be provided by federal employees. But nobody asked me (imagine that!). TSP is a very economically administered plan and I am willing to pay for quality in any case. Skeptical in the ranks GovExec.com reader Posted May 24, 2006 9:30 AM
• Response to TSPer: Dude, where is your head? The investment has always been in the private sector! Just the plan is administered by the "Board" and NFC performed the recordkeeping function. The issue now is that the private contractor that will be performing that function, has demonstrated no ability to properly reconcile the plan funds! Hey, doesn't matter who the private sector investor is ... as the first part of that plan is you have to have funds to invest! Got it???? Can you hear me now? Nancy Drew Posted May 19, 2006 12:33 PM
• The story makes it sound as if NFC's building sustained major storm damage, and the fact is that it did not. Although many of the NFC staff moved to alternate sites across the United States, we did not miss a beat in providing payroll and payroll related services to our customers. Many of the NFC staff was back working at our New Orleans Facility as early as Oct. 1, 2005. There are other quotes in this article that are incorrect. No one abandoned their job or their duties, in fact we put our lives on hold and concern for family and property second to making sure that we did our job and that there would be no lapse of service to NFC's customers. Next time you print an article about NFC -- go to a reliable source for your information before you print untruths. GovExec.com reader Posted May 19, 2006 5:11 PM