The General Accounting Office (GAO) has issued a letter about the Thrift Savings Plan (TSP) to members of the Committee on Government Reform in the House that will interest many TSP investors.
The TSP has a lot of investors and it has a lot of money under its jurisdiction–and it is growing fast. The TSP had about 2.6 million participants and held about $100.6 billion in Net Assets Available for Benefits as of December 31, 2001, and about 3 million participants and $102.3 billion in Net Assets Available for Benefits as of December 31, 2002.
As many investors know, the TSP had a contract with American Management Systems (AMS) to develop a software program to develop a new record-keeping system for the program. To put it mildly, it didn’t work out. The agency sued the contractor and the suit was eventually settled.
According to the GAO, investors should have been charged for the $41 million dollar loss several years ago when the loss occurred in 2001. Investors were eventually charged for the loss but not until this year.
GAO says the amounts that should have been charged to individual accounts would not have been very much–
virtually nothing for new employees to roughly $400 for an account of $1 million.
The reason given for not allocating the loss at the time it occurred as the confidence of TSP management in prevailing in court. That, says GAO, isn’t a very good reason since no one can predict with certainty how a lawsuit will be decided and the decision not to allocate the money was inconsistent with prior practice of the TSP board.
You can read the letter just released by GAO on this issue and the report issued by GAO on the TSP system earlier this year. Links to both items are on the left hand side of this page.