Under the settlement agreement, reached Friday, Fairfax, Va.-based American Management Systems will pay the TSP $15 million and the board will pay AMS $10 million. Participants in the 401k-style TSP will be assessed the remaining $36,047,161.25 in expenses from the failed contract.
The board has not yet determined how the $36 million bill from the settlement with AMS will be assessed against TSP participants' accounts. About 3 million federal employees, retirees and military personnel have TSP accounts.
"Given the additional time, cost, and potential liability that lay ahead, I am very pleased that a settlement on terms favorable to plan participants and beneficiaries has been achieved," said Gary Amelio, TSP's recently appointed executive director.
The TSP board and AMS have been locked in a series of legal battles since the board fired the contractor in July 2001. The board hired AMS in 1997 to modernize the TSP's record-keeping system to provide federal employees with more tools to manage their retirement accounts. The $30 million project was scheduled for completion by May 2000. After four years and several delays, the TSP board fired AMS and filed a $350 million lawsuit against the contractor. AMS countersued the board in Federal Claims Court and sought payment for $41 million in expenses for work it performed while under contract. All the lawsuits were dismissed under last week's settlement.
"Once we were afforded the opportunity to bring this to closure, it was in the best interest of all to seize the moment," said Alfred Mockett, CEO and chairman of AMS. "The dispute has been distracting, time consuming and expensive."
After firing AMS, the TSP board hired contractor Materials, Communication & Computers Inc., and spent another $33 million and another two years before launching the new record-keeping system earlier this month.
"The $33 million will be amortized over 10 years so there won't be an immediate impact from that," TSP spokesman Tom Trabucco said Monday.
Much like private sector 401k programs, the new system provides daily valuation of accounts and daily processing of transactions. Previously, the value of TSP accounts was updated monthly rather than daily, and some transactions took several weeks to process.
However, in the past week problems with the TSP Web site have prevented some participants from accessing the system using the Internet.
"The glitch, the bug is still there, but we'll identify it, we'll get it out of there," Trabucco said.
Participants can also access the record keeping system by telephone at 504-255-8777.