Retirement Policy

The Congressional Research Service has raised questions regarding how good a model the Thrift Savings Plan is for private investment accounts in Social Security. CRS noted that the TSP is the largest defined contribution plan in the United States with, at latest accounting, more than three million participants and some $150 billion on investment.

The Bush administration has argued that the TSP, with its index-based funds with low overhead costs– about 60 cents for each $1,000 invested , far below what mutual funds typically charge–is a good model for private Social Security accounts.


Said CRS, “The low administrative costs of the TSP have been achieved in part because other federal agencies provide substantial administrative support for their employees who participate in the TSP. The administrative costs for the TSP do not include the services that federal agencies provide for TSP participants. The agencies where federal employees work are responsible for educating employees about the TSP, enrolling them in the plan, and transmitting payroll information to the central TSP record keeper.”

“A number of analysts have concluded that adapting the TSP model to the private sector would be difficult because the nearly 6 million employers in the United States and their 150 million employees differ in important ways from the federal government and its workforce. One analyst has pointed out that .the TSP functions well because it is essentially a single-employer plan with ready access to centralized record keeping and services. Another has asked how the TSP model could be made to work in the private sector when most private employers submit contribution information on paper once each year, as opposed to the automated payroll submissions now given to the TSP by federal agencies each payday. While the TSP is an efficient provider of retirement savings accounts to the federal workforce, it is a model that would be difficult to duplicate among the numerous and diverse employers in the private-sector.”