Article Portraying TSP Investor Dismay Over Money “In the Stratosphere Somewhere”
An article on the Thrift Savings Plan (TSP) was recently published with several statements that potentially worry TSP investors. While there is no reason to panic about the safety of TSP investments, here is an explanation of how problems such as those highlighted in the article can occur. The article, which was published in Atlanta, Georgia, potentially reached a large number of people, and many TSP investors have undoubtedly seen this or similar articles.
A reason for potential apprehension among TSP investors results from problems occurring when the TSP website underwent major changes in 2022. The Atlanta article mingled the previous website problems with the problems now being faced by a TSP investor still waiting to receive funds she was transferring to a private IRA account.
When the new TSP website was unveiled, numerous problems were reported by website users. The problems and widespread publicity led to GAO announcing it was investigating the issue. An interim report was issued by GAO early last year. A class action lawsuit was also filed over the website problems.
The Federal Retirement Thrift Investment Board (FRTIB) acted quickly to resolve the problems, and in a short time, TSP investors reported fewer problems. By October 2022, the FRTIB provided information explaining how many of the problems had been resolved.
While it appears the problems were quickly addressed, and the website has been up and running well for some time, some investors may have lingering doubts. The recent publicity in Atlanta media includes an article about a distraught TSP investor and an investigation by a TV reporter in Atlanta of the TSP website problems may have stirred up the pot.
Here are samples of the comments in the article regarding the TSP:
- “…[A] woman’s retirement savings (Robyn Smith) has been in limbo for months after she asked the federal government to roll over her money into her private IRA.”
- “On Oct. 19, Smith initiated a rollover of her Thrift Savings Plan, or TSP, the 401k-like plan for federal government employees into her IRA. But the check never made it.”
- “The retired federal law enforcement officer relies on the monthly payouts from her retirement account to pay her bills. ‘So, I’m going on month four with 50% less of my monthly take-home pay.’ ”
- A new computer system transition in 2022 was allegedly to blame but the problem was so big the government’s internal auditors at the GAO sent out an alert.
Can Your TSP Investment “Just Disappear”?
Kim Weaver, the Director of External Affairs at the Federal Retirement Thrift Investment Board (FRTIB) provided information on this article and whether TSP participants should be worried about the comments regarding the safety of their TSP investment.
The TSP will not provide information about a specific TSP investor. But, said Ms. Weaver, “[P]articipants do not need to worry that money ‘just disappears.'” There is a process for handling these issues potentially involving the Treasury Department conducting an investigation when funds are missing.
Treasury Department May Investigate Before Reissuing Funds
Here is what often happens when problems arise with temporarily missing money. This response addresses comments such as those in the recent article noted above.
This is when a money out transaction (any type of withdrawal or loan) from the TSP needs to be reissued. That happens for a variety of reasons – the participant provides a bad address or invalid account information; a check is lost or stolen; or the TSP enters a bad address or invalid account information for transactions conducted via the ThriftLine. In these situations, we tell the participant to wait 2 weeks before the TSP puts a stop payment on the payment, providing time for the payment to be received by the participant or located by the receiving financial institution.
When this occurs and the funds do not arrive at the designated point, TSP informs the Treasury Department. The Treasury Department must stop payment and reissue the money. This usually takes 1-2 days if it is going to the same address or the same account.
But, if the TSP participant wants the money reissued to a different address, a new EFT account, or a new financial institution (for rollovers), there is a seven-day period before the reissue. The additional waiting period is an anti-fraud measure.
In this example, the participant waited two weeks before calling for a stop payment/reissue. After 14 days, the participant makes a change so that adds another seven days. It could take at least 21 days for a reissue under this scenario.
If the money has been stolen, such as a check has been cashed by a bad actor, the Treasury Department has to investigate before it will reissue the money. This investigation can take at least 60-90 days. The investigation is between the TSP participant and the Treasury Department. The TSP is not involved. Once the investigation is complete, the funds are reissued.
Role of the TSP
The TSP cannot provide the money to the participant during this process until the investigation has been completed. The TSP does not have the money after it has been disbursed.
The TSP processes about 350,000 “money out” transactions per month and roughly 1,500 reissues a month. This translates to roughly 0.43% of total money-out transactions each month.
According to Ms. Weaver: “We know that any delay in receiving money is frustrating and concerning for our participants. However, the money is most certainly not lost.”