DC - New Investment Options Moving Ahead Despite Computer Problems

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New Investment Options Moving Ahead Despite Computer Problems

By Stephen Barr

Thursday , September 28, 2000 ; B02

Starting in May, the Thrift Savings Plan will offer two investment opportunities eagerly awaited by many federal employees, the board that oversees the TSP announced yesterday.

The new investment choices will be offered next spring even though software bugs have delayed the start of a new record-keeping system. Instead of waiting for the new computer system, the TSP will modify the current system so that it can handle the two extra funds.

The Federal Retirement Thrift Investment Board said the new investment choices will be the Small Capitalization Stock Index Investment Fund, or S Fund, and the International Stock Index Investment Fund, or I Fund.

The S Fund will invest in stocks of medium and small companies tracked by the Wilshire 4500 stock index fund. The I Fund will invest in major European, Australian and Asian stocks tracked by the EAFE index.

The two new funds will be added to stock, bond and government securities funds already available to TSP participants. As of Aug. 31, TSP assets totaled $102 billion, and retirement savings accounts had been established for nearly 2.5 million participants.

In 1996, Congress authorized the creation of the small cap and international funds, and in 1997, the TSP board awarded the contract to develop a new record-keeping system to support the new funds and provide for daily valuation of accounts.

Originally planned for May of this year, the launch of the two funds was delayed, primarily because of software problems encountered by the contractor, American Management Systems Inc., of Fairfax.

In June, the TSP board announced that it had put the new record-keeping system and new funds on indefinite hold because of worries about software defects and delays in testing. But yesterday, the board set a firm date for introducing the new funds despite uncertainty over when it would roll out the upgraded record-keeping system.

Using the existing system will "provide the most anticipated feature of the pending enhancements to the Thrift Savings Plan without any risk to the plan's long-standing financial and functional integrity," Roger W. Mehle, executive director of the thrift board, said in a statement.

He said the existing system, operated by the Agriculture Department's National Finance Center, "can be modified to provide these additional investment opportunities next May."

The decision to move forward with the small cap and international funds comes at a time when House and Senate negotiators are wrapping up their work on the fiscal 2001 defense authorization act. That legislation would allow the military to participate in the TSP next year and could add 2.3 million members to the plan.

The defense bill would create a 60-day "open season," starting in October 2001, so that members of the armed forces could enroll in the TSP. Contributions into the plan would begin flowing in December 2001.

A TSP spokesman said the board had studied contingency proposals after learning that the contractor faced software difficulties. While less than expected, more than 5,700 bugs have been found in the new system -- with fixes for about 1,600 pending -- as of Sept. 12.

Because it was uncertain when the new system would be ready and because the new investment options could be made available through the existing system, the board decided to go ahead and set May 1 as the date so that agencies, retirement counselors and employees would have adequate planning time.

By modifying, rather than replacing, the existing record-keeping system, the board ensures that the military can join the TSP in "a stable benefit environment," the TSP spokesman said.

In its statement, the thrift board said no date has been established for the new system to begin operating. The board, though, reaffirmed that the new system would be brought online as soon as possible, with accounts converted as soon as is feasible.

That seems to suggest that the TSP could shift to the new system in phases to ensure that promised improvements are made in an orderly fashion.

http://washingtonpost.com/wp-dyn/articles/A32779-2000Sep28.html

-- Doris (groomlk@bellsouth.net), September 28, 2000


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