In a few years the Thrift Savings Plan could feel more like a private plan. With a more participant-focused strategy the Federal Retirement Thrift Investment Board...
In a few years the Thrift Savings Plan could feel more like a private plan. With a more participant-focused strategy the Federal Retirement Thrift Investment Board will make a shift to providing greater access and flexibility and a more informative customer service experience. The goal is to provide more services without increasing costs for participants.
“Right now we are built to facilitate transactions, said FRTIB Executive Director Gregory Long to the board and the Employee Thrift Advisory Council at the May 18 meeting. “What we’re not built to do is to engage in the conversations around them, and that’s where we eventually want to get to.”
55 percent of participants who left federal service last quarter also left the TSP. Long said the research points to three main reasons why people leave the TSP: they feel limited on investment options, they feel limited on withdrawal options and they want the direct advice they get from IRA “salesmen.”
Greater Flexibility
The limit on withdrawals is one of the biggest reasons why participants move their money out of the TSP to an IRA. Participants want greater flexibility. One reason for the current limitations is a longstanding concern that greater flexibility will cause participants to “pay for the present by starving their future.” But Long said the data suggests exactly the opposite, that greater withdrawal flexibility will lead to happier investors who want to stick around.
Making hardship restarts automatic will save the participant from having to re- elect after a mandatory 6-month hiatus due to a hardship withdrawal. Currently an investor receives a letter in the mail. But as FRTIB Office of Enterprise Planning Director Renée Wilder said, “Inertia is powerful.” Participants often don’t sign back up and end up missing out on years of matched contributions.
FRTIB also wants to give participants the ability to move dollar amounts between funds. Right now an investor may only transfer a percentage rather than a dollar amount. And, a participant with both a military and a civilian TSP account cannot combine the two.
Another reason some participants close their TSP accounts is the limited investment options. The index funds that make up a TSP account do not allow an investor to invest in specific companies like an IRA that includes mutual fund options.
Expanded Electronic Access
The FRTIB relies on agencies to update participant’s information. Until an employee makes his first contribution FRTIB has no knowledge of him. If an employee wants to change his address or his deferrals he must go through the payroll office at his agency. Long said having participants come directly to them will improve the experience, produce much cleaner data and reduce paper. Until two weeks ago FRTIB operated through the mail. E-mail addresses were used only to automate the login process, they were not stored.
Automating forms will also reduce cost and human error. On the beneficiary form alone the board sees a 20% rejection rate, often because the form has been filled out incorrectly. An electronic form would indicate errors and offer help to the user ensuring the form is accurate before it can be submitted.
Investors can look forward to more personalized data at their fingertips too. The “Zone of Confidence,” currently in draft form, will give participants the big picture of their retirement based on all of their investments. To get that information now, an investor would need to visit at least three different websites.
Education
“The long-term goal is: if we can connect data points in our system and have addresses connected to those data points we’d love to send out targeted emails and even personalized emails,” said Long.
He laid out a vision for the future where plan participants will be contacted with a phone call around important milestones such as when an employee moves from one agency to another, if his contribution percentage is too high or too low or when he’s eligible to begin making catch-up contributions.
The goal is to have TSP representatives steer participants towards good retirement decisions. By having the participant deal directly with the board instead of going through his agency FRTIB will have more data to draw upon. Right now the FRTIB can only see the dollar amount an investor contributes, not the percentage. Long said there is a myth that when you leave public service you take your TSP with you, when in fact it’s an account for life, if you choose to make it one. It’s just one of a number of myths that might be dispelled through better communication and participant engagement.
Finding the right change
The agency has primarily focused on transactional efficiency since it began investing funds in 1987. In the last strategic planning cycle the board decided to make a change. “To do that we had to get smart,” said FRTIB Office of Enterprise Planning Director Renée Wilder, “not only about our plan, but about our participants.”
They explored industry, plan sponsors and administrators to understand how they deliver service. They asked participants. FRTIB engaged in an 11-month long benchmark program with Deloitte Consulting. They looked at three principle areas: plan design & services, key operational processes and cost. Wilder said some of Deloitte’s suggestions fit into the long-term plan and some didn’t and others just weren’t worth the effort. Auto-escalation is one example. She said they are considering it, but it may not be right for TSP. Wilder said it is standard in the defined contribution marketplace but FRTIB does not currently have the authority to implement it.
The board wants to offer advice and individualized guidance, but one thing you won’t see anytime soon is service locations opening up for walk-in service. The goal is to maintain or reduce costs to participants. Wilder said every change is considered and tested with cost in mind.
“I do not anticipate doing anything that is going to sharply be cut,” said Long. “Even with all the things I’m talking about and the expenses that would be associated with them; I absolutely will be committed to being the lowest cost plan in America still—by far.”
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Lauren Larson is Federal Drive producer and broadcast operations manager at Federal News Network. Follow @llarsonWFED
Follow @llarsonWFED