What's New| Questions & Answers |
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September 27, 2000 Questions and Answers Regarding the Implementation of the S and I Funds in the Current TSP Record Keeping System
- Why are you implementing the new Small Capitalization Stock Index Investment (S) Fund and the International Stock Index Investment (I) Fund in the current system?
- Will other features (such as daily valuation, daily interfund transfers, and partial and mixed withdrawals) be available on May 1, 2001?
- Why did you decide to modify the current system instead of waiting for the new record keeping system?
- How are you making sure that the new record keeping system will be implemented as soon as feasible?
- How much will the deferral cost?
- What is the status of H.R. 208?
- Does H.R. 208 mean that I can roll over my regular IRA into the TSP? How about money from my mutual fund or savings account?
- What waiting period is affected by H.R. 208?
- What is the schedule for participant statement mailings?
- When will the next TSP open season be held?
- Will the deferral of the new system implementation mean that loans and withdrawals will continue to be disbursed once a month?
- When will I be able to receive any loan or withdrawal payment by EFT/Direct Deposit?
- When will I be able to request a loan or withdrawal from the Web site or ThriftLine?
- When will I be able to make direct payments on my loan by submitting guaranteed funds to the TSP?
Why are you implementing the new Small Capitalization Stock Index Investment (S) Fund and the International Stock Index Investment (I) Fund in the current system?
In June 2000, after we announced the extension of the deferral of the new record keeping system which is being developed by American Management Systems, Inc., we conferred with our record keeper, the National Finance Center, to determine if the current record keeping system could be modified to include the S and I Funds, the most anticipated of the pending TSP enhancements. We have now determined that such a modification can be made. Accordingly, we plan to make the S and I Funds available within the framework of the current system on May 1, 2001. (More information about the S and I Funds is available in the May 2000 TSP Highlights available from the TSP Web site in Forms & Publications.)
Will other features (such as daily valuation, daily interfund transfers, and partial and mixed withdrawals) be available on May 1, 2001?
Once the S and I Funds are incorporated into the current system, you will be able to change the way your payroll contributions are being invested in the five funds at any time, instead of only during a TSP open season. (You will also continue to be able to make an interfund transfer to change the way the balance in your account is invested. However, interfund transfers will still occur only once a month because accounts will remain monthly valued.) You will be able to accomplish either of these transactions by using the TSP Web site or the ThriftLine, or by mailing a TSP Investment Allocation form to the TSP at the address on the form.
Like daily valuation and daily processing of interfund transfer requests, the other enhancements to the TSP (e.g., daily disbursements, and partial and mixed withdrawals) cannot be included in the current system. Consequently, they will not be available until the new system is implemented, which will be as soon as possible after May 1. (Monthly reports on progress toward implementation of the new system will continue to be posted on the TSP Web site.) The leaflet How the TSP is Changing explains the enhancements and the changes to the TSP that will occur when the new record keeping system is implemented. The leaflet is available from the TSP Web site in Forms & Publications.
Why did you decide to modify the current system instead of waiting for the new record keeping system?
When it was awarded in May 1997, the contract with American Management Systems, Inc. (AMS) anticipated a three-year project schedule for design, development, testing, and implementation of the new record keeping system; this would have resulted in a May 2000 project completion date. At a meeting in early January 2000 with senior officials of the Federal Retirement Thrift Investment Board, AMS recommended an implementation deferral to accommodate the extensive system testing program, which had experienced delays. Based on assurances from AMS that October 1 could be achieved with relative certainty, and in light of pending legislation which would affect the TSP, the Board established the October 2000 date for implementation.
In a meeting on June 8, AMS officials advised the Board that an October 1 implementation date would involve significant risks for the successful operation of the new system. This assessment was based on the status of the testing program and the time needed to fix the numerous software defects (bugs) disclosed to date and those anticipated to be found as testing progressed. (Based on an analysis using industry standards as well as contractor experience, AMS predicted that between 8,000 and 10,000 bugs could be expected.) Because of the additional time needed for the testing and correction processes, those tasks that depend upon the validation of the software would also be delayed. As a result, the October 1 date was no longer feasible.
Although AMS suggested a spring 2001 implementation, the Board will not adopt that date (or any other date) until it sees actual and substantial progress by AMS in reaching its scheduled milestones to complete the testing of the new system, the correction of significant software defects, and the accomplishment of the numerous other tasks associated with the implementation of the new system. At that time, the Board will announce the implementation date.
Because of the continued uncertainty about an implementation date and because we can make the S and I Funds available in our current stable record keeping system without risk to the TSP’s longstanding financial and functional integrity, the Board decided to do so. This decision provides participants with the most anticipated feature of the pending enhancements to the TSP while the contractor completes the work needed to deliver the new TSP record keeping system.
How are you making sure that the new record keeping system will be implemented as soon as feasible?
A number of steps have been taken to ensure that the implementation proceeds. The Board has been unstinting in applying its own resources to completion of the new record keeping system. Additionally, the Board has received assurances from AMS top management that all resources necessary to complete the project will be made available. However, the Board will not accept (and will not pay for) a substandard contractor product. If AMS is unable to make acceptable progress in completing the contract in the months to come, the Board will replace it with another contractor. As noted above, monthly updates on the progress toward system completion are available on the TSP Web site.
How much will the deferral cost?
In itself, the deferral of the new system implementation will not increase contractor costs. The Board will pay only those legitimate costs associated with the development, testing, and implementation of the new system, regardless of the time period over which the project is completed. Overall, we anticipate that the effect of the new system costs on the administrative expense ratio (which reflects allocation of expenses to TSP participant accounts) will be minimal. For 1999, the TSP’s administrative expense ratio was .05% for the G Fund, .06% for the C Fund, and .07% for the F Fund (or 50¢, 60¢, or 70¢ per $1,000 of account balance, respectively). We do not anticipate a change in these costs as a result of the new system’s delay.
What is the status of H.R. 208?
H.R. 208 is pending legislation that would permit the TSP to accept transfers from certain other retirement savings plans (see below). H.R. 208 would also allow new Federal employees to contribute their own money (through payroll contributions) to the TSP without the current six- to twelve-month wait. Versions of H.R. 208 with slight differences between them have now been passed by the House of Representatives and the Senate. We are waiting to see if final legislative action to resolve the differences will occur before the congressional adjournment scheduled for October. An implementation date will be decided if and when the legislation is enacted.
Does H.R. 208 mean that I can roll over my regular IRA into the TSP? How about money from my mutual fund or savings account?
No. H.R. 208 would allow direct rollovers from certain retirement plans established by your previous employer. These plans are limited to pension, profit-sharing, and stock bonus plans, and include 401(k) plans. Although a modified version of H.R. 208 would allow rollovers from conduit IRAs, rollovers from regular IRAs would not be allowed. If H.R. 208 is enacted, the TSP will provide information describing which funds will be accepted by the TSP and the process for rolling them over.
What waiting period is affected by H.R. 208?
Currently, newly hired employees must wait until the second open season after they are hired (a six- to twelve-month period) before they can contribute to the TSP. H.R. 208 would permit employees to begin contributing their own money (through payroll contributions) to the TSP as soon as they are hired if they are otherwise eligible to contribute to the Plan (i.e., they are covered by the Federal Employees’ Retirement System, the Civil Service Retirement System, or another equivalent retirement system). However, unless the current provisions of H.R. 208 are modified (which is possible), the existing waiting periods would still apply to agency contributions (both the Agency Automatic (1%) and the Agency Matching Contributions).
What is the schedule for participant statement mailings?
The next participant statement mailing will be in November 2000, as usual. There will be no change in our semiannual participant statement mailing schedule until new system implementation.
When will the next TSP open season be held?
The next open season will be held from November 15, 2000, to January 31, 2001.
Will the deferral of the new system implementation mean that loans and withdrawals will continue to be disbursed once a month?
Yes. Until the new system is implemented, loans and withdrawals, as well as all other transactions, will be processed using the existing record keeping system and under current rules.
Will the deferral of the new system implementation apply to the new withdrawal options?
Yes. The new withdrawal options and the other changes to the TSP withdrawal program, which were described in the leaflet How the TSP is Changing, cannot be implemented until the new record keeping system is implemented.
When will I be able to receive any loan or withdrawal payment by EFT/Direct Deposit?
Additional EFT/Direct Deposit options will become available when the new system is implemented. EFT/Direct Deposit is currently available for monthly payments only.
When will I be able to request a loan or withdrawal from the Web site or ThriftLine?
Because this is a new record keeping system feature, you will not be able to use the Web site or the ThriftLine to apply for a loan or withdrawal until the new system is implemented.
When will I be able to make direct payments on my loan by submitting guaranteed funds to the TSP?
Because this is a feature of the new record keeping system, you will have to wait until the new system is implemented before making loan payments by guaranteed funds directly to the TSP (as opposed to payroll deductions). Currently, you may only make prepayments in full.
