TSP hires new vendor to take the plan into the 21st century

The agency that manages the Thrift Savings Plan has chosen a new vendor to improve its customer service, modernize its infrastructure and provide a suite of new services to its participants.

The Federal Retirement Thrift Investment Board hired Accenture Federal Services as the lead contractor on its highly-anticipated recordkeeping services acquisition (RKSA). The procurement encompasses everything from managing the TSP call centers and software that process participants’ transactions to improving the plan’s cybersecurity posture and IT infrastructure.

“They will be providing a modernized experience while maintaining or increasing the high level of service that TSP customers have grown to expect,” Tee Ramos, director of participant services for the FRTIB, told the board Monday.

Accenture will also help the FRTIB provide several new services, including a mutual fund window, electronic signature capabilities and a mobile app for the plan’s participants. According to the TSP’s most recent participant survey, younger federal employees and military members are most interested in accessing the plan and their accounts through a mobile app.

Ramos said most of the new services should be in place in mid-2022.

The FRTIB has been developing the requirements and its vision for the new recordkeeping services acquisition for several years. It replaces several existing TSP contracts with one integrated recordkeeping procurement.

“That will allow us to offer better, more seamless and higher quality services to our participants,” Ravi Deo, the FRTIB’s executive director, said back in September during a presentation on the new RKSA project to the board.

The project is responsible for a more than $100 million increase to the FRTIB’s budget in fiscal 2021, which is when the TSP anticipates the majority of the expected changes will take place. The contract allows for an 18-month transition period and four additional three-year options.

The TSP will gradually transition away from its legacy recordkeeping systems as the new systems come online. Beyond its plans to adopt a modern suite of recordkeeping systems, the TSP is also preparing for an updated financial management system and a new suite of agency IT services.

TSP shifts to a multi-manager approach

Beyond the TSP’s new recordkeeping services acquisition, the TSP will soon begin using two firms to manage the C, S, F and I funds.

BlackRock has been the TSP’s longtime fund manager, but an independent consulting firm suggested a single investment manager could be carrying too much risk on its own.

“Aon Investments pointed out that there was organizational concentration risk associated with having only one manager in place for 100% of the outsourced TSP index assets,” Sean McCaffrey, the FRTIB’s chief investment officer, said Monday. “It mentioned that a negative event could cause disruption of participant trading activity, loss of confidence in the TSP or possibly a missed corporate action, tax reclaim, dividend or some other administration item.”

Aon suggested the TSP adopt a two-manager structure to reduce the potential for risk, and the plan will implement the recommendation in the coming months.

Though it’s highly unlikely that any one firm that the TSP uses could ever become completely inoperable, it is possible that business could be disrupted for a day or two, or even a few weeks, McCaffrey said.

“If for any reason one investment manager is unable to fulfill its duties to facilitate the handling of transactions for a day or a series of days, the other investment manager is ready to stand in and handle all cash flows rather than just its pro rata share,” he said. “Going beyond that, in the extremely remote instance that a manager is deemed to be incapable of performing its investment-management duties the TSP will be able to turn to the other manager to take on 100% of investment management responsibility without the need to recompete the investment manager for that portion of the assets needing attention.”

The FRTIB decided it would implement the recommended two-manager structure, and the agency issued a request for information last spring.

BlackRock again will serve as the primary manager for the C, S, F and I funds. It will manage 80% of the S,F and I funds, and 90% of the C fund, McCaffrey said.

The FRTIB selected State Street Global Advisors as its second fund manager last month. It will manage the remaining 20% of the S, F and I funds, and 10% of the C fund, shares that range from $9.9 billion to nearly $22 billion.

Over the course of the next few months, the agency will gradually move assets to State Street. The FRTIB will start with the S&P 500 holdings in the C fund in January.

“We’ll likely limit ourselves to one fund a month,” McCaffrey said. “If all goes perfectly smoothly with the first transfer, only then will we consider accelerating things.”

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