Thrift Savings Plan administrative expenses stay steady

Net administrative expenses charged to each participating federal employee's Thrift Savings Plan account were about 20 cents per $1,000 of investment in 2011, roughly the same as the figure for 2010, TSP officials said Monday.

In its annual report of gross and net expenses released Monday, the Federal Retirement Thrift Investment Board reported that its expenses grossed $139.9 million in 2011, but that figure was offset by $13.8 million in loan fees and $49.2 million in forfeitures. Many of the forfeitures were due to agencies mistakenly classifying employees who fall under the older Civil Service Retirement System as members of the newer Federal Employees Retirement System.

CSRS employees erroneously classified as FERS employees are given the option of retroactively moving back into CSRS after retirement. They can keep their personal TSP contributions, but must forfeit their agency's portion. When they do so, that money goes back into TSP and offsets its administrative expenses.

Mistaken retirement classifications are increasing: forfeitures were up $6 million in 2011 compared to 2010. The defined annuity benefits available to employees in CSRS are more generous, so many take that option, Federal Retirement Thrift Investment Board Executive Director Gregory Long explained during the board's monthly meeting Monday.

Although the errors help TSP's finances by offsetting expenses through forfeitures, board members agreed the problem must be resolved.

"The expenses that are charged to participants are lower because of the forfeiture number. The benefit participants receive is at some point going to go away," Long said. "The expenses that are then charged to participants are going to go up. I want to disclose that upfront. The thinking is, it's going to be a decade away, but we don't know."

"This is an ongoing problem," said Pamela-Jeanne Moran, the board's director of participant services. "These errors are occurring now, not just a long time ago."

The board works with the Office of Personnel Management to make sure personnel offices at agencies are aware of the issue and carefully check records when people retire, Moran said. Only 26 percent to 29 percent of the forfeitures for 2011 were for reasons other than CSRS employees being entered into the wrong system.

Participation in the retirement plan remains strong. Contributions to the TSP in 2011 exceeded $25 billion -- an all-time high for the plan, and a 3 percent increase from 2010 levels, Director of External Affairs Tom Trabucco reported Monday. Interfund transfers also were at their highest since restrictions were enacted in 2008.