Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Cashing Out From the TSP


After 25 years pioneering the business of federal retirement plans, Thomas Trabucco will now be on the receiving end of the 401(k)-style program he helped create.

The retirement wishes of a man who made a career looking out for federal workers’ retirement benefits are simple and few. First order of business: avoid Beltway traffic. “My No. 1 priority is not participating in rush hour,” says Trabucco, who will be leaving his post as spokesman for the Federal Thrift Savings Plan in February. The father of three has been commuting to Washington from his Bethesda, Md., home since 1980. Now he’ll have more time to tackle projects around the house and play golf.

“I have a big list of honey-dos, which I have been putting off,” he adds. And if his track record of getting big things done is any indication, Lilly Trabucco should see that list dwindle quickly.

He deserves credit for helping build the program and making it popular among feds, according to Jim Sauber, chief of staff for the National Association of Letter Carriers and former chairman of the Employee Thrift Advisory Council. “He not only did a tremendous job at handling the external affairs for the agency but also of understanding the value of public service and looking out for the interests of participants and beneficiaries, and keeping his eye on the ball,” Sauber says. “He’s very dedicated.”

Trabucco, 60, interviewed for his job as director of external affairs for the Federal Retirement Thrift Investment Board on New Year’s Eve 1986. He calls his years at the TSP the high point of a public service career that began in Hyde Park, N.Y., where he mowed Franklin Delano Roosevelt’s grave for the National Park Service. During college he studied labor management relations and spent summers running errands for the local chapter of the National Federation of Federal Employees. Trabucco moved to the Washington area in 1974 to become a national representative for the union—his first “real job,” he says.

He worked in various positions for NFFE until 1978. Then Trabucco became a staff member for what was then the House Committee on Post Office and Civil Service. He continued to immerse himself in federal pay and benefits after leaving Capitol Hill in 1983, lobbying for the National Active and Retired Federal Employees Association when dramatic reforms were afoot for the federal retirement system. 

That year Congress enacted changes requiring federal workers to pay into Social Security. “That was a major part of what put Social Security on firm financial footing . . . until just a couple of years ago,” he says, adding there were many new hires at the time who would not be drawing Social Security benefits for another 30 years. “But then Congress had to build a new retirement system that worked around Social Security.” The result was the Federal Employees Retirement System, which offers a smaller
annuity than the old Civil Service Retirement System, but also includes Social Security and TSP benefits.

Trabucco credits the late Sen. Ted Stevens, who chaired the Senate subcommittee charged with establishing the TSP’s fund design, including the decision to base the savings plan on passive index funds. The rationale was that “investments that are coming in to the TSP and passing through the markets are not being used to change those markets or affect those markets in any way other than to benefit from the earnings that the markets provide over time,” he says. “And so that passive approach was critical.”

Investment activity in the Thrift Savings Plan started in July 1986. By 1987, the plan had roughly 860,000 participants. Today approximately 4.5 million employees are in the plan. The board comprises five presidentially appointed directors and an executive director.

Trabucco and his colleagues had to hustle to get the plan off the ground and begin enrolling employees: The first board was not elected until April 1987, leaving little time and personnel to explain the program to employees and set up a payroll system. “All of this was completed in approximately six months,” he says. “That was certainly a big accomplishment at the time.” 

Both 1987 and 1989 marked big drops in stock prices, but in 1987, TSP offered only the G Fund, or the government securities fund, which protected the program from taking a big hit in a down market. “You had calls from reporters saying, ‘How bad is the market, how bad is it for employees?’ ” he recalls. “I said as far as I know, they are working and not paying attention to what’s going on in the markets. Over the years, I think employees have learned not to get too excited about the short-term ups and downs in the market.” 

Explaining 401(k)s to the media and advocating on behalf of federal employees was one thing—defending their interests in Congress was another.

Trabucco recalls the TSP’s first oversight hearing amid efforts to ensure that the plan’s funds were not invested
in companies that did business in Northern Ireland or in apartheid-era South Africa. He was able to keep the geopolitical turmoil in those countries at arm’s length. “We maintained that it’s not the job of the TSP participants to change their investments,” Trabucco says. “Our law says act solely in the interest of the participants and beneficiaries and for their exclusive benefit.”

Trabucco and the Thrift Board faced Congress again in 2005 when players in the housing industry wanted the TSP to get in on the mortgage-backed securities trend. “Right from the beginning, they were interested in having their investments prominently displayed in the TSP,” he says.

Industry giants wanted the board to make a free-standing TSP fund—a sixth fund—out of the popular but risky securities. Instead, the board included some mortgage-backed securities in its F Fund, a less risky move. The portion of the F Fund that is invested in mortgage-backed securities is determined by the overall marketplace, Trabucco explains.

The housing industry was one of many efforts by special interest groups and political movements to change the program. “This was all predicted when the TSP was created,” he says. “We were given the necessary independence and tools to resist these efforts, and have done so successfully.”

Another one of Trabucco’s proudest moments in TSP history is the inclusion of military service members in 2002. He began discussions with Defense Department officials during the Gulf War. Today, more than 7,000 uniformed service members have TSP accounts. 

“There have been a lot of innovations in 401(k) plans in the last 25 years, and the TSP plan has managed to stay current with all of those changes,” he says. “It does look very much like the 401(k) plans that other American workers have . . . and it does not seem out of line that federal employees should also have a way to save for their retirement.”

Perhaps the hardest work is done for the next generation of champions for federal benefits. But there are always new challenges—like finding ways to ease employees’ commutes. That’s something Tom Trabucco is looking forward to.

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