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TSP board to ask whether sequester and furloughs affecting participants’ investment choices

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The Federal Retirement Thrift Investment Board plans to ask Thrift Savings Plan participants whether the sequester and–in many cases, employee furloughs–has prompted them to change their investment choices.

The question will be added to the biannual survey going out to a sample of about 50,000 TSP account holders this fall, Renee Wilder, the board’s director of enterprise planning, said in a brief interview today. At the board’s monthly meeting, Wilder said that TSP participation among active Federal Employees Retirement System members dipped slightly in June to a 12-month low of 2.39 million, but it is unclear whether that decline stemmed from soft market conditions or the impact of sequester-related budget cuts. The overall FERS participation rate remained relatively stable last month at 86.8 percent.

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TSP Board withholding results of security review prompted by 2011 hacking attack

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Last year, following the disclosure that 123,000 Thrift Savings Plan accounts had been hacked, the Federal Retirement Thrift Investment Board launched a wide-ranging assessment of its computer system security.

That “Tiger Team” task force review is now complete, but the board isn’t making the findings public.

Instead, the agency is withholding the entire report on the grounds that disclosure “could reasonably be expected to risk circumvention of the law,”  Amanda Haas, a Freedom of Information Act officer with the board, said in a response today to Federal Times’ FOIA request. Haas did not immediately reply to a request for more information on why the board is claiming that particular exemption to the act’s requirement that government records are generally public.

The board began the review after learning early last year that Social Security numbers, addresses and other personal data for the 123,000 account-holders had been stolen from a contractor’s network. The cyberattack actually occurred in 2011, but board officials didn’t learn about it until getting notification from the FBI. The bureau has not announced arrests or charges in the case.

The Tiger Team review was in part intended to identify any computer security gaps and come up with ways to fix them, Greg Long, the thrift board’s executive director, told a Senate subcommittee last July.  Long made no mention of law enforcement issues, but acknowledged that–at the time of the attack–the board didn’t have a “breach notification plan” because it lacked the resources to develop one. (Long signed such a plan in June 2012.)

The TSP has some 4.6 million participants, including military personnel, civilian agency employees and U.S. Postal Service workers.

Scott Hodes, a lawyer who was once acting chief of the FBI’s FOIA litigation unit, was not familiar with the report, but said in an interview that the board has to establish a threshold to legally withhold information under the FOIA law enforcement exemption. Even then, parts of the report that don’t meet that threshold must be released, Hodes said.

“They can’t withhold everything.”

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G-Fund again saving the world (temporarily)

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If you have money invested in the Thrift Savings Plan’s G-Fund, take a bow. Your retirement nest egg is now part of a strategy to stave off worldwide financial calamity.

That’s because the Treasury Department intends to intentionally stiff the fund as one of several “extraordinary measures” announced last month to buy time after the government hit its legal $16.4 trillion debt ceiling Dec. 31.

Here’s how it works: the fund—technically known as the Government Securities Investment Fund—is continually re-invested in short-term government bonds. Because those bonds count toward the debt ceiling, Treasury suspends re-investments to free up more borrowing “headroom.” The G-Fund’s balance is currently about $156 billion, making the suspension by far the most significant of the steps now under way to delay a government default that many economists say would trigger a global panic.

The tactic is nothing new; Treasury used it during the last debt ceiling crisis in 2011. But if money is lying fallow, it’s not earning interest. The 2011 suspension temporarily cost the G-fund $378.5 million, the Government Accountability Office reported last year. But by law, the Treasury Department has to make the fund whole.  In its July report, the GAO confirmed that the fund had indeed been “fully restored.”

Understandably, however, feds are nervous. In a message posted on the TSP’s web site, Executive Director Greg Long reiterated that existing law “will work to ensure that G Fund investors are completely unaffected” by Treasury’s tactics. Loans and withdrawals will not be affected, Long added.

[This post has been updated.]

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G-Fund and postal benefits fund made whole, GAO says

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It’s official: The Thrift Savings Plan’s G-Fund is back to full strength after losing almost $400 million courtesy of last year’s debt ceiling showdown.

The confirmation comes from a Government Accountability Office review of the Treasury Department’s maneuvering to head off an unprecedented U.S. default after Congress initially deadlocked over raising the nation’s borrowing limit. The standoff was resolved (at least temporarily) last August with approval of the Budget Control Act, which traded a debt-ceiling increase for spending cuts.

But in the months before the act’s passage, Treasury resorted to a number of “extraordinary actions” to buy time. One involved the G-Fund (officially known as the Government Securities Investment Fund), which is invested in short-term bonds. Because those bonds count against the debt ceiling, the government in May 2011 halted new investments as a temporary means of holding down borrowing. But, of course, if that money’s not invested, it’s not earning interest. Some $137.5 billion in G-Fund principal lay fallow during the 3-1/2 month hiatus. By GAO’ s reckoning, the lost interest amounted to $378.5 million.

By law, however, the government has to make up the difference once the crisis is over. That’s since been done, the review says, as the Treasury Department has “fully restored” the lost interest.

“It’s exactly as if they had never had to use the extraordinary actions,” Susan Irving, one of the report’s authors, said in an interview.

The G-Fund was not the only account touched in this way. The Treasury Department performed similar maneuvers–albeit in smaller amounts–with the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Both have also been made whole, according to the report.

So relax, already. At least until next time.

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Union fears pay cuts could hurt TSP savings

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Federal employees’ Thrift Savings Plan accounts could end up collateral damage in the push to hike federal employees’ pension contributions, the American Federation of Government Employees said yesterday.

At Monday’s meeting with the Federal Retirement Thrift Investment Board, AFGE public policy director Jacque Simon asked for more granular, grade-by-grade data on TSP contribution rates. Simon said she wants to know whether lower-paid federal employees are pulling back on their TSP contributions in response to proposals to increase pension contributions by anywhere from 1.2 percent to 5 percent.

“It’s going to be increasingly important to have access to data like that,” Simon said. “We have good reason to believe that TSP participation by people in lower grades is going to decline as people are forced to pay more for their FERS annuity. [...] It’s crucial we get that [information] not next year, but today.”

The board said it didn’t have data that could be broken down in that way, since it only tracks the dollar amount of employees’ contributions — not percentages of their overall salaries. But the board said it could get limited information on contribution rates for automatically-enrolled feds, although those participants make up a miniscule portion of the overall TSP population. Simon said that would be better than nothing.

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Retirements, hardship withdrawls cut TSP contributions

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Here are highlights from Monday’s Federal Retirement Thrift Investment Board meeting:

-The number of participants with no contributions to their TSP accounts increased by about 3,000 last month, compared with a 25,000 increase on October. The number of active FERS employees contributing to the Thrift Savings Plan decreased by about 5,000 in November.

-Renee Wilder, the board’s director of research and strategic planning said an increase in separations, financial hardship withdrawals and the fact that employees are hitting their contribution limits have contributed to a decrease in participation. Employees who take out a hardship withdrawal cannot contribute to their TSP accounts for 6 months. The board also expects to see more retirements in the face of hiring freezes and budget cuts.

-The C, S and I funds decreased 1.1 percent, 5.9 percent and 14.5 percent respectively as of Dec. 16.

-The TSP’s overall fund balance is nearly $292 billion, up from more than $289 billion in  October.

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Postal Service may not pull out of TSP after all

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The U.S. Postal Service is walking back a statement made earlier this week regarding their plans for the Thrift Savings Plan. I asked the Postal Service last week whether their proposal to pull out of federal retirement programs and create their own system would also mean creating their own defined contribution program. Spokesman David Partenheimer emailed me Sunday to say, “Under our proposal, we would not participate in TSP.”

Partenheimer this morning emailed me again to say their earlier statement was inaccurate:

Our legislative proposal, as currently outlined in the white paper, does not call for pulling out of TSP. We are [reviewing] all options related to this issue, and changes to Postal Service involvement in the TSP program is one of those changes, but no decision on this has been made.

So a postal-only 401(k) plan is at least still on the table. Stay tuned as we look further into the USPS’ plans.

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Obama signs tobacco bill containing TSP provisions

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President Barack Obama today signed the Family Smoking Prevention and Tobacco Control Act, which contains several major overhauls to the government’s Thrift Savings Plan retirement program. The TSP overhaul will:

  • Create a Roth option, which will allow TSP participants to pay taxes on money they invest in the program and make tax-free withdrawals in retirement years later. The Roth option is expected to mostly benefit military service members.
  • Automatically enroll all new civilian federal employees in the TSP’s G Fund. Military service members will not be automatically enrolled.
  • Allow new enrollees to receive automatic matching contributions from their agency right away, instead of the six months to one year waiting period now in effect. This will be in place by Aug. 1, the board said.
  • Allow the board governing TSP to create a mutual fund option if it chooses.
  • Allow spouses to maintain the TSP accounts of deceased participants. Spouses are now required to withdraw money within 60 days of a participant’s death and reinvest it in another retirement account.

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House to vote on TSP, sick leave bill

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Update: HR 1804 passed by a unanimous voice vote today. It will now head to the Senate, which is expected to consider the bill as part of the larger tobacco bill.

Original post: The House is preparing to vote on a bill containing several provisions affecting federal employees this afternoon. HR 1804, the Federal Retirement Reform Act, would:

  • Automatically enroll all new employees in the Thrift Savings Plan’s G Fund. The Pentagon would decide on its own whether new military service members would be automatically enrolled.
  • Create a Roth 401(k) option in the TSP.
  • Allow the board governing the TSP to create additional investment funds for participants.
  • Allow employees under the Federal Employees Retirement System to count their unused sick leave towards calculating their retirement annuities.
  • Make sure Civil Service Retirement System employees who work part time at the end of their careers are paid their full annuities. Due to a faulty 1986 law, CSRS employees who go part time before retirement find their pre-1986 service is incorrectly calculated as part-time service, costing them hundreds or thousands of dollars each year. This bill would fix that error.

Floor debate is expected to begin at 1 p.m.

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