Obama administration says new TSP system will modernize retirement program.
The White House on Tuesday touted an upcoming change that will ease the process of switching from a private retirement investment account into the Thrift Savings Plan.
As part of a larger initiative to “build a 21st century retirement system,” the Obama administration highlighted a plan to help federal employees roll over a private 401(k) into the government’s retirement savings program. The White House said the Federal Retirement Thrift Investment Board, which governs the TSP, will issue a request for proposals in June seeking a provider to initiate the reform.
“The federal government’s own retirement plan is also making it easier for federal employees to roll their prior 401(k) savings into their TSP account,” the White House said in a fact sheet. “This June, the TSP will issue a request for proposals to, among other things, eventually facilitate rollovers to the TSP by making the service provider, not the participant, responsible for shepherding rollovers.”
Kim Weaver, a FRTIB spokeswoman, said the agency will award a “participant support contract” aimed at improving the way services are offered to enrollees across the board. The agency’s call centers will be merged with its processing units, which handle the filling out of forms. Included in the change will be FRTIB and its selected provider taking care of the burdensome process of bringing a private sector retirement account into a TSP.
“There’s a whole host of things we want to do to improve customer services,” Weaver said. “One of the things we want to do is rolling services.”
She added the agency will seek to be more proactive and supportive in dealing with participants. FRTIB did not wait for a push from the Obama administration to make the changes, and initially issued a request for information one year ago seeking input from private industry on how it could improve its rollover and other customer services.
“They’re doing it,” Weaver said of the White House. “We were already on the way.”
Federal employees looking to bring their 401(k) into their TSP will still have to initiate the process even after the new system is implemented. The paperwork and the burdensome back-and-forth between the new and old provider will be handled by TSP, however. Weaver said the board has been aware of the difficulties in making that transition “for a while.”
A Government Accountability Office report found in 2013 the process of rolling over one employer-sponsored 401(k) to another was excessively difficult under existing law. The new system, which will enable the same people that answer phone calls from TSP participants to fill out forms for them, will both improve customer service and prevent “leakage,” Weaver said. The current system incentivizes individuals with small balances -- $5,000 or less -- in their old, private sector 401(k) accounts to withdraw the money when they leave their jobs. They often then spend the money rather than using it for its original purpose of retirement savings.
“It’s why we are emphasizing it,” Weaver said. “It’s why the White House is emphasizing it. It’s a problem in the retirement world.”
It will take some time for the changes to take effect, however. FRTIB does not anticipate awarding its participant support contract until 2017, which will be followed by a transition period and a full ramping up.
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