The Thrift Savings Plan (TSP) is a major leg of a federal employee’s income after turning in a federal identification badge and leaving the worksite for the last time to enjoy doing what has probably been put off when working in a full-time job.
The TSP is one of the most popular benefits for federal employees. In the latest meeting of the Federal Retirement Thrift Investment Board (FRTIB), the Board members discussed upcoming changes to the TSP.
2021 TSP Budget Increase
With assets in excess of $640 billion and more than six million participants, running a retirement investment program is not inexpensive. The TSP budget for the current year is about $385.6 million. The TSP has calculated the current budget to participant ratio is about $64.
No doubt, the TSP is a target for hackers. An important portion of the TSP mission is to protect its assets from hackers around the world. With rapidly expanding technology, and increasing sophistication of potential threats, the TSP is implementing new technology to provide additional services and to maintain security of the TSP system.
Substantial Investment Costs
Unfortunately, this means that there will be substantial investment costs to implement the new system. The FRTIB does not receive any appropriated funds; all funds to run the Agency and the TSP come from administrative expenses levied on TSP participants.
The proposed TSP budget for fiscal year 2021 will jump to $498.4 million for the current budget of $385.6 million—about a 29% increase. This would also increase the budget to participant ratio to $79 from the current $64 participant level—an increase of 23.4%.
As much of the increase would be due to the cost of implementing a new record-keeping system, and running two systems during the implementation of the new system, the large budget increase would be temporary, according to the budget projections from the TSP.
In fiscal year 2022, the budget would fall to $479.7 million, drop again in fiscal year 2023 to $416 million, and drop again in fiscal year 2024 to $408.8 million.
Impact of Budget Changes to Budget to Participant Ratio
With the assets of the TSP projected to grow to $750 billion in fiscal year 2024, and the number of participants in the TSP projected to grow to seven million, the projected budget to participant ratio would fall to $58 participant.
Here is a chart displaying projected TSP budgets by fiscal year and the projected budget to participant cost ratio for each fiscal year.
| Fiscal Year | Projected Budget (Millions $) | Participant Cost Ratio |
| 2020 | $385.60 | $64.00 |
| 2021 | $498.40 | $79.00 |
| 2022 | $479.70 | $74.00 |
| 2023 | $416.00 | $61.00 |
| 2024 | $408.80 | $58.00 |
In effect, the new projects to be implemented at the TSP will have an impact on the cost to participants. As noted in this article from 2018, there are advantages to the TSP to federal employees, but the TSP may not always have the lowest expenses for investments.
The RKSA Project
The RKSA Project of the TSP refers to record-keeping services acquisition. It is designed to improve TSP services, add options for TSP investors and provide consistent, reliable and secure record-keeping, benefits processing and customer service.
The RKSA project will take 18-24 months to implement. Among the services that will be added for TSP investors will be a mobile application for investors to be able to access their TSP accounts and a mutual-fund window.
A mutual-fund window has been discussed by the TSP and by at least some TSP investors for some time. When fully implemented, this window will be designed to allow TSP participants to invest in mutual funds offered on the platform used by the winning RKSA vendor. These mutual funds will be different from the 5 core TSP Funds that are now available to TSP investors.
Summary
Running the TSP is a big business. Budget projections in the past have been accurate and the TSP is an employment benefit that is highly-regarded by participants. The projected expense increases reflect an effort by the FRTIB to keep the system safe, up-to-date and to expand its services.
