February 7, 2007
Officials of the Thrift Savings Plan on Wednesday said the plan's already low cost to participants could drop even more in the future.
Board officials also predicted that investments in the plan, which currently stand at $206 billion, could grow to $300 billion in three years.
"Going forward, we must be cognizant of the huge growth this plan is going to undergo in the next three or four years and in the future," said board Chairman Andrew Saul at a special biannual meeting of the Employee Thrift Advisory Council.
The 401(k)-style retirement savings plan allows federal employees to choose from five funds that invest in government securities, stocks and bonds. On top of those funds are the plan's life-cycle funds, which mix the five existing TSP options so investments shift from a mix of aggressive to more secure investments as federal employees near retirement.
The cost of running the TSP compares favorably to private plans. Last year, the administrative costs amounted to three "basis points." For every basis point, 10 cents is spent for every $1,000 invested. So, for the three basis points, 30 cents were spent for $1,000 invested.
TSP Executive Director Gary Amelio said the costs of the plan could eventually drop to one basis point. Private plans often cost 50 to 80 basis points to run.
TSP officials also announced that they had hired a search firm to assist in selecting a candidate to replace Amelio, who announced his resignation last month. Amelio, who has served in his position since 2003, will become president of retirement services for ULLICO Inc., which provides insurance and investments for union members.
Board members said several internal and external candidates would be presented at the next board meeting, scheduled for Feb. 20. The board hopes to fill the position by April 1. TSP General Counsel Thomas Emswiler will serve as acting executive director during the transition.
Board members also discussed legislative priorities for the new Congress, saying they plan to examine the benefits of automatic enrollment for employees, a change in the default fund from the G Fund to the life-cycle funds, and the potential addition of new funds and a Roth 401(k) option in the plan.
The meeting was conducted by the Employee Thrift Advisory Council, composed of representatives of federal labor unions including the American Federation of Government Employees, the National Treasury Employees Union and the American Postal Workers Union, and nonbargaining employee groups such as the National Active and Retired Federal Employees Association, Federally Employed Women, the Federal Managers Association and the Senior Executives Association.
Most of the five basic funds in the Thrift Savings Plan posted gains in January. The S Fund, which invests in small- and mid-sized domestic companies by tracking the Dow Jones Wilshire 4500 Index, led the group with 3.14 percent for a 12-month total return of 11.46 percent.
The C Fund, which tracks the Standard & Poor's 500 Index of stocks in the largest domestic companies, grew 1.53 percent last month for a 12-month total return of 14.52 percent. Following were international investments represented in the I Fund, which grew 1.31 percent for a 12-month gain of 20.57 percent. The G Fund, which consists of short-term Treasury securities without any serious risk from market fluctuations, grew 0.43 percent for a 12-month gain of 5 percent. Finally, the F Fund, invested in fixed-income bonds, made no gains last month, but had a 12-month gain of 4.31 percent.
February 7, 2007