Officials to shore up TSP against transaction influxes

Recent stock market dips trigger officials to assess the retirement plan's capacity to handle increased activity.

The current system that processes transactions under the Thrift Savings Plan is capable of handling increased activity from market fluctuations, but will need to be updated, TSP officials said Monday.

At a monthly Federal Retirement Thrift Investment Board meeting, officials overseeing the 401(k)-style retirement plan said that increased volatility in the markets last week led to increased transfers out of the plan's three equity funds -- the common stocks (C), small- and mid-sized companies (S) and international (I) funds. TSP Chief Investment Officer Tracey Ray said the movement generated $9.5 million in trading costs on Thursday alone.

Plan officials said they launched a comprehensive review of the processing system in March, following a market plunge that caused about 10 percent of I Fund investors to make changes.

Executive Director Gregory Long said that analysis and a separate review conducted by IBM found the current mainframe adequate to handle influxes of transactions. But he added that officials are developing a detailed budget plan to update the system and ensure preparedness for major market movements.

"It's not only how we plan for daily events but also for macro events," Long said. "We have put a lot of thought into our budget in planning for those particular events."

TSP officials said in April that the transaction processing system normally operates at about three-fifths of its capacity. Should the market fall significantly, the system could be turned on to full capacity, allowing it to handle four to five times the volume of transactions. Any that exceeded that amount could be delayed.

Long said officials will unveil the budget plan, review fiscal 2007 expenditures and discuss approved fiscal 2008 funding at next month's meeting.

"It's a very tough time to be an investor," FRTIB Chairman Andrew Saul said. "We don't control the markets, but we do have to make sure the participants' money is being handled well and that they have confidence in what we're doing."