TSP Roth Fin Educ Industry Day slides.pdf

TSP Financial Education Industry Day January 26, 2010

• 8:30 AM Arrival and registration

• 9:00 – 10:30 Introduction of FRTIB staff;

meeting logistics; Agency overview and program objectives

• 10:30 – 10:45 Break Submission of written questions

• 10:45 – 11:30 Response to questions

• 11:30 – 12:00 Break / Lunch

Agenda Tuesday, January 26, 2009

Optional Individual Meetings Tuesday, January 26th

• 12:00 – 5:00 PM One-on-one meetings

Wednesday, January 27th

• 8:00 AM – 3:00 PM One-on-one meetings

Thursday, January 28th

• 9:00 AM – 12:00 PM One-on-one meetings

Federal Retirement Thrift Investment Board

• FRTIB created in 1986

• Independent Federal Agency

– Administers the Thrift Savings Plan solely in the interest of the participants and their beneficiaries

• Defined contribution savings and investment plan for Federal civilian employees and members of the uniformed services

Thrift Savings Plan

• Retirement savings and investment plan similar to private sector 401 (k) plans

• Tax-deferred contributions; tax-deferred earnings

– US may make tax-exempt contributions w/ tax-deferred earnings

• Integral component of FERS; supplemental for CSRS and US

– FERS – hired post 12/31/83

– CSRS – hired pre-1/1/84

– US – eligible to participate in 2002

• Benefits include investment options, loan program, in-service and post-separation withdrawal options

Demographics

• Largest defined contribution plan in the world

• 4.3 million total participants

• 3.2 million active

1,000

1,500

2,000

2,500

(0

's

System

FERS CSRS US

TSP Participation Rates and Account Balances

• Participation rates by system and average account balances:

• FERS: 82% $68,790

• CSRS: 64% $68,590

• U.S: 29% $10,420

Highlights of Contributions Rules Civilian

• FERS and CSRS

– Employee Contributions

• Deductions from basic pay only

• Elect % or $ up to 402(g) limit, $16,500

• Age-eligible make separate $ election up to catch-up limit, $5,500

• FERS only

– Agency Automatic (1%) Contributions

• Not based on Employee Contributions

• Subject to vesting

– Agency Matching

• Based on regular elective deferral each pay date

• $1/$1 for first 3% of paycheck

• 50¢/$1 for next 2% of paycheck

• Automatically vested

Highlights of Contributions Rules Uniformed Services

• Employee Contributions

– Deductions from basic, incentive, special, and bonus pays

• Elect % of paycheck up to 402(g) limit, $16,500

• Separate $ election of age-eligible catch-up contributions up to limit, $5,500

• Contributions deducted from tax-exempt (and tax-deferred) pay subject to

415(c) limit, $49,000

– Tax-exempt contributions not subject to 402(g) limit

– Catch-up contributions are not subject to 402(g) or 415(c) limit

– Participants who contribute to civilian and uniformed services accounts are subject to all IRC limits above

• Matching Contributions

– Legislation available; no Service Secretaries opt for matching at this time

– Separate legislation for select group within the U.S. Army

• Based on basic pay contributions only

• $1/$1 for first 3% of paycheck

• 50¢/$1 for next 2% of paycheck

• Automatically vested

TSP Investment Funds

• Government Securities Investment Fund (G Fund)

• Fixed Income Index Investment Fund (F Fund)

• Common Stock Index Investment Fund (C Fund)

• U.S. Small-capitalization Stock Index Investment Fund

(S Fund)

• International Stock Index Investment Fund (I Fund)

• Lifecycle Funds (L Funds)

TSP Investment Structure

• Law requires use of index funds for equity options

– “Active” decisions could be based on politics

– Index funds are low cost

• Board decided to use indexing for fixed income fund

• G Fund comprised of non-marketable US Treasury securities of maturities 4 years and beyond

• Five lifecycle funds, constructed from core investment options

G Fund F Fund C Fund S Fund I Fund L Funds

$173,281

$152,009 $128,925

$99,312

$100,553

$97,686

$94,649

$77,268 $58,166

$44,889

$206,604

$35,183

$231,602

$202,839 $244,431

Annual Year-End Balances ($ millions)

System/Program Assistance

TSP Information Flow

Contribution Flows

Guid an ce

M ate ria ls

FRTIB

Record Keeper

Participant

Agency/ Service

Primary info for active participants

Service Investments &

Disbursements

Systems/Program

Call Centers

Inform ation

Inform ation

FRTIB Communication Challenges

• Participants located globally (all time zones including outer space)

• Personal access not always possible

• All occupations; all levels of financial/tax acumen

• All ages (16 to 102)

• No e-mail address information retained

TSP Communications

• Website is now primary communications vehicle

– Transactions on-line: Investment decisions, some loans, withdrawals. Over 90% of investment transactions online

– Detailed account information

• Voice response system (ThriftLine)

– Automated account information

– Some automated transactions

– Opt out to call centers

• Agency/Service responsibilities

– Retirement counseling

– Basic TSP education

– Administration (contribution elections, payroll activities)

FRTIB Communication Strategies

• “Welcome to the TSP” letter for new participants

• Quarterly and annual statements

• Announcements in quarterly newsletter

(Highlights)

• Letter from the Executive Director w/annual statement

• Post card/leaflet/other mailing to all participants

• DVDs for civilian and uniformed services

• Briefings at employing offices

Roth TSP

• Why people want a Roth

– Lower compensation

– Young demographic

– Uniformed Services

• Legislation signed June 2009

• Implementation planned for end of 2011

Roth TSP

• Challenges we see

– Explaining the Roth TSP

– Advantages/disadvantages

– Education vs. advice

– Does tax strategy lead to broad investment counseling?

– Leverage technology for the education effort

– Communications cost

FRTIB Objectives

• Get industry insights on how other sponsors are providing financial/Roth communications, education and/or advice – what works and doesn’t work

• Learn about what tools/resources are available in the marketplace

• Gain input that will help us focus our approach to participants with the introduction of the Roth

TSP

• Provide knowledge basis for likely financial/Roth education RFP (later 2010)

Post-Meeting Follow-up

• Posted to FedBizOps

– Presentation slides

– Questions and answers

– Any supplemental information

FRTIB Contacts

Primary Contact Linda Bethke-Cyr, Contracting Officer LCyr@tsp.gov 202.942.1693

Secondary Contact Waleska Pierantoni-Monge, Contract Specialist wpierantoni@tsp.gov 202.942.1694 mailto:LCyr@tsp.gov mailto:wpierantoni@tsp.gov