By Stephen Barr
Monday, October 15, 2007
The Thrift Savings Plan turned 20 this year, and Gregory T. Long, the plan's chief executive, is looking to set the tone for the plan's future, what he calls "next-generation thinking."
The TSP has grown into a mega-retirement program, with 3.8 million participants and assets of about $225 billion. But it will undergo some stress in the next decade or so when baby boomers begin pulling their savings out of the 401(k)-type savings and investment program.
"We are concerned about the growing activity that is coming down on us," Long said in an interview at the TSP's H Street office. "Because there are so many government employees retiring in the next decade, we need to make sure our systems are built such that they can handle a large volume of distributions and rollovers."
Just over six months ago, Long, 40, was named executive director of the Federal Retirement Thrift Investment Board, a role that puts him in charge of TSP operations.
He had worked for the previous two years developing products and services for the TSP. Before that, he spent 14 years in the investment business in Boston, including seven years at State Street and its record-keeping affiliate CitiStreet, where he was director of marketing for the American Bar Association retirement funds.
"I'm having fun. I like doing this," Long said. "I came here to do important work, and I feel like I'm doing important work."
To help handle the government's retirement wave and to ensure the program can operate in a catastrophic event, Long is helping steer a two-year project aimed at updating the TSP's computer systems. The project will allow the TSP system to process stock and bond transactions faster and improve other customer services.
Long also wants to bring the TSP -- which was created by Congress to switch federal employees from a traditional pension system into a portable retirement program -- in line with emerging private-sector practices.
He has recommended that the TSP move to automatic enrollment of new government hires, rather than wait for them to sign up. The idea is to get younger employees into the habit of saving early on, taking advantage of the opportunity for long-term investing. New hires who do not want to participate could opt out.
Another proposal by Long would change the TSP's default fund from treasury securities to an age-appropriate life-cycle fund. A study by the TSP found that 48 percent of participants who enrolled in 2004 did not make any investment decisions in the three years after enrollment and remained 100 percent invested in Treasury securities, which may not provide returns sufficient for a comfortable retirement.
Many government employees in their 50s and 60s, especially those eligible for matching contributions from their agencies, hold TSP accounts worth from $112,000 to $160,000, a recent study found. Many mid-career hires also are transferring their private-sector savings into the TSP, in part because of its low overhead cost, about 30 cents for each $1,000 invested.
The larger account balances also mean that government employees are paying more attention to the TSP. Some TSP participants, in e-mails and phone calls, have said:
¿ They would like to see more fund choices.
Long said a consultant's study concluded "there is no compelling need to add any additional options." In addition, he said, the law that established the TSP requires indexed funds that mirror the ups and downs of the stock market, limiting choices.
Still, he said, the issue will be reviewed from time to time. "I am certainly aware that the average 401(k) out there, the last time I looked, had 18 choices, and we have 10."
¿ They would like to see funds built around sectors.
The TSP law does not allow it to offer sector-based funds, Long said. He noted that in the late 1990s, some private-sector plans added technology funds, only to see their participants suffer losses when the tech bubble burst. "One of the things we are trying to do here is not to concentrate risk in particular industries or sectors," Long said.
¿ They want a Roth 401(k) option, which tends to favor participants who expect to be in a higher tax bracket in retirement.
"Not right now," Long said. The TSP wants to see how the Roth option is received in the private sector and will be studying it for the next year or so.
The question, he said, is how to educate 3.8 million people on what is effectively not an investment decision, but a tax decision. That would be a significant departure from what we have done in the past."
¿ They are annoyed by the recent decision to replace Social Security numbers with 13-digit account numbers.
The goal is to help protect the identity and accounts of participants, and to "make sure the TSP is state of the art in terms of security," Long said.
"I recognize there is going to be some amount of participants who are not going to be happy, to remember one more number in a stable of numbers and passwords they have to remember. I'm cognizant of that. We all are. But we have to take steps to protect people."
As the TSP's chief executive, Long reports to a board of presidential appointees, chaired by Andrew M. Saul of New York. He was named executive director after a national search.
Long, a graduate of St. Anselm College in New Hampshire, lives in the District with his spouse and son. He waved off any discussion of his personal life, preferring to focus on the "satisfying" and "great work" performed by the TSP.
Long spent six years with Putnam Investments in Boston before joining State Street, where he reported to a board and "learned how to survive under fire."
His work at the TSP is similar to his previous jobs, Long said, except that "there are just more zeroes at the end.
"The issues that the TSP faces in terms of investment structure, plan design, Web systems, phone systems -- these are really the same issues I have dealt with for years, just a bigger scale."
Stephen Barr's e-mail address isbarrs@washpost.com.
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