test one two three one t members to come over so we'll have to do the best we can and in the event that members are not present we will allow them in the record to submit testimony a later time i do savings plans infrastructure and security capabilities in response to multiple legislative initiatives regulatory proposals and a change financial landscape ranking member and subcommittee members will each have five minutes to make opening statements and all members will have three days within which to add statements to the records and any other documents ladies and gentlemen despite recent signs of economic recovery the past year has been they have also been significantly diminished in size given the absolutely end to go role that plays in determining the future retirement income of employees i feel it is critically important that the subcommittee conduct routine oversight of this aspect of the federal employees retirement system therefore today's hearing is intended to compare the performance against private sector plans as well as to discuss whether federal one option and authorizing a mutual fund window these recent changes deserve our close attention especially during the critical developmental and implementation stages which again point to the relevance of today i'd also like to no the need for further debate over the addition of a mutual fund window feature for the t s p as this option is being pondered i believe it's important that we all have some level of understanding about the potential impact such changes could have about the upcoming rollout of the new website and its recent eighteen million dollar capital investment further today will provide employee representative groups with opportunities to share suggested regulatory and or legislative proposals it's my hope that the testimony back we received today will provide the committee with precise guidance and direction again i thank each of you for being with us this afternoon and i look forward you my apologies thank you thank you i want to thank the chairman for holding this hearing on such an important matter the thrift savings plan is central component of the federal employee retirement system often referred to as first and its success is critical from a number of different standpoints clearly the kind of retirement an employee is offered at a given job is a significant employee impact upon the employer's ability to recruit and retain people with the best skills and qualifications therefore it is important that the t s p is managed carefully and properly with means which means regular congressional oversight and legislation when necessary this is been one of the most challenging economic years the country has had in decades and we are not out of the woods yet by no means the timing of this economic crisis has truly been tragic for a number of reasons the federal government is disproportionately top heavy with employees who are rapidly approaching federal retirement and now many of them find that while the defined benefits are intact most firms employees have taken a massive hit to their retirement savings we all know that of the world of investments there are always ups and downs the way of measured success of long term investment is not in the snapshot of the year but over the life of an investment in this hearing will give us a chance to find out whether the t s p and others responsible for its management believe they have the necessary tools to complete the job both there are things that we in congress can do to help the thrift savings plan and han two thousand and nine was signed into law in june and made several improvements to the function of the t s p perhaps most significantly the raw type investment options was offered along participants to pay taxes on retirement savings now rather than upon all this is a great tool especially for younger employees at the lower end of their earning spectrum however this tool has been available in the rest of the investment world for decades we also know that the t s p continues to have few far investment options than most private retirement programs with that said the t s p can continues to outperform most private for a one case and is unparalleled in its low associated administrative costs t s p can be frustrating to navigate however i believe that how the t s p faces with its participants is critical to its continued success and participation improvements can still be made when we are it is this new and these new investment tools as we didn't june of this year we must also see that its participants are fully informed of their available options it's forward to working with the chairman and those responsible for managing the system to ensure that federal employees continue to have one of the best investment available vestment vehicles available anywhere and appreciate the importance of gesture and from the participants again i thank you for your participation and you the savings plan is one of the best retirement plans offered by any employer under the plan the government contributes a specific dollar amount or percentage of pay into an employee's account which can be invested in stocks bonds either financial instruments this is an excellent program which many of our federal employees benefit from greatly and we must do all that we can in our power to ensure that it remains vibrant and strong and of the thrift savings plan back in two thousand and nine what about some welcome changes to the program that permits new federal employees to begin contributing to the t s p the mediately rather than waiting six to twelve months early participation in the federal employees retirement system particularly in the thrift savings plan is critical if an employee is to is going to maximize the amount of savings earned by his or her retirement not only does he act include provisions to eliminate the waiting period meet requirements but it authorizes automatic enrollment for all new federal civil employees allowing participants to contribute after tax dollars to the d s p therefore allowing them to have drop contributions associated earnings tax rate and an associated earning six three lastly this act would allow spouses of deceased federal employees to leave funds in the t s p and become the managers of those accounts i'm eager to hear how some of these provisions will be rolled out the time frames two hundred thirty four b n dollars in assets making it the world's largest defined contribution plan hearings like this are important to ensure that the program continues to serve the best interest of federal employees uniformed services reserves and their spouses and with that mr chairman i yield back thank you chair now recognizes actually i know that the gentleman who is you know just a gal has declined the opportunity to make acronyms to a minimum today david cox the national secretary treasurer of the american federation of government employees the nation's largest union representing federal government federal and government employees previously as the co chair of the veterans affair veterans affairs national partnership council from one thousand nine hundred to two thousand and again from two thousand and two to two thousand and six president calling the president of the national treasury re elected for a second two year term as the national association of retired federal employees national president in september two thousand and eight the first woman to be elected as president senior executives association he served on his board of directors for eight years additionally mr strong botany has been extensively involved with the national active and retired federal employees association and last but certainly not leas colonel michael hayden u s air force retired joined the legislative team in july two thousand and five upon completion of a twenty five year military career in air and space operations personnel practice at this committee to swear witnesses so that offer testimony on the record may i please ask you to rise and raise your right  fiduciary of the t s p for federal employees and members of the uniform services to t s p as you said is the largest defined contribution retirement plan in the world the council maintained for more than four point two federal and postal employee members of the uniformed services and retirees as of september thirtieth the t s p had approximately two hundred thirty four billion times savings your letter of invitation explained that the purpose of this hearing is so examine a host of issues including upgrades to the t s p's information technology security capabilities legislative initiatives regulatory proposals and a change financial landscape i am please discuss each of these matters before i do however i'd like to note that i am surrounded by individuals representing organizations whose knowledge and commitment to the first item cited in your letter the fiscal year two thousand and ten budget approved by the board just last month demonstrates our commitment to infrastructure security and other vital record keeping activities ninety nine million dollars or approximately seventy six percent of our total budget is dedicated to these areas we have an ambitious agenda to improve the t s p the thrift savings plan and handsome act of two thousand and nine provide substantial new benefits which when we must implement further other improvements like updating the t s p website and lamenting the messaging capabilities demand agency resources the t s p these expenses are borne not by the taxpayers but by participants during two thousand and eight t s p expense ratio was two  basis or twenty as for every one thousand dollars invested by a participant this compares very favorably to other similar plans despite our low administrative expenses we nevertheless maintain a robust ip infrastructure to support activities attached to my statement is a status report presented by the agency's director of automated systems to the board and the tac at the joint meeting we held last october you'll note that that report covers our recently completed capital investments for our systems modernization as well as a status report on data center and software applications on april twenty ninth of last year appeared before the subcommittee to express the board's support for automatically enrolling newly hired employees in the t s p as the congress develop its legislation on that issue it added provisions which bring the t s p up to date with comparable private sector four one k plans and a number of areas together these legislative changes make the t s p and even more flexible and valuable program i come before you today to say thank you and to describe our plans for implementing these multiple legislative initiatives first is immediate agency contributions as soon as the new law was signed on june twenty second the waiting period refers employees to receive agency contributions was a limited all fors employees should now be receiving agency automatically one percent contributions and if they are contributing their own money agency matching contributions as well next is accounts for spouse beneficiaries beginning in the spring of two thousand and ten if a participant dies and the spouse is the beneficiary of the participants t s p account the spouse will have the option of leaving that death benefit payment in the t s p in his or her own name third automatic enrollment starting next spring newly hired civilian federal civilian employees will automatically make payroll contributions of three percent of pay to the t s p their agencies will say in these contributions to the t s p along with an additional amount equal in four percent of pay which is made up of one percent automatic and three percent matching contributions each pay period unless the to opt out or contribute a different amount this will give new employees a chance to start saving earlier to receive agency contributions and and potentially reach greater levels of retirement security four is the ro feature in two thousand and eleven we plan to offer a roth feature which will be the equivalent of a private sector roth for one k this is subject to different tax rules on a roth ira and open to people of all income level employee contributions to the raw t s p will be made on an after tax basis and participants will generally not have to pay federal income tax on money they withdraw from it we estimate it will take about two years to implement this benefit it will require substantial modifications to agency as well as uniform services human resources and personnel system as well as our own t s p systems and their accounting and associated systems the fifth feature is the mutual fund when this legislation allows  s p to offer a mutual fund window in the future this would allow participants to invest some of their t s p savings in mutual funds outside of the t s p expenses related to the mutual fund window would be borne solely by those participants who use the t s p has not said that and the implementation target or date we will further consider this operation in cooperation with the unions and associations that make up the no longer need to wrap up the regulatory proposals are simply unused leave that is something which requires a change to first and we will be happy to work with the congress and the tac in getting that done and finally the limits on interferon transfers this is a policy that ok i represent the national association of letter carriers on the council and served as the council's chair since two thousand and three is receiving is plan is extremely important part of the federal retirement system and is very popular among the four point two million federal employees and retirees who maintain t s p accounts protecting the two hundred thirty four billion dollars invested in the t s p which are the personal assets of our members is the tax highest priority we also use a twice the twice a year  meetings we hold with the board to address administrative issues and service problems at our most recent meeting on october nineteenth we met with the entire board and received briefings on the new t s p website and the agency's ongoing effort to improve its i co sponsors from both parties t s p participants very much appreciate the improvements in the plan provided by your bill the authorization of immediate t s p matching contributions an automatic enrollment will significantly boost participation in the t s p among younger workers and increase the level of savings for among new employees we also very much welcome the legal change that will permit the spouses of deceased participants to keep their inherited funds in the t s p instead of rolling them over into much more expense expensive plans many federal employees will also welcome the roth option in the t s p when it becomes available especially the hundreds of thousands of men and women in the armed forces thanks again to all of the you who supported these improvements of course we will continue to look for new ways to improve the plan one such improvement springs to mind recently the i r s has ruled that four one k participants may contribute the dollar value of unused leave that might be forfeited or paid out as terminal even to their into their appointment and or reappointment of members of the thrift investment board at present all five members of the board are serving beyond their terms of office three of them chairman andrew saul and members alex sanchez and gordon whiting have expressed interest in being re nominated while to have others wish to leave the board although all five positions of the board or presidential appointments by law to nominees are recommended by the speaker of the house and the senate majority leader most of the organizations that make up the terms to promote stability and continuity and we believe it would be unwise to turn over the entire membership of the board all at one time we hope the subcommittee will urge the obama administration to move quickly as possible to these appointments and that you will encourage the speaker of the house to do the same with respect to her recommended nominee finally i wish to conclude by noting that federal employees employers have remained committed to the ts despite the severe economic crisis there is no way to sugarcoat the heavy losses experienced by many p participants last year the c s and i phones all declined by more than thirty seven percent in two thousand and eight all the equity markets have bounced back somewhat this year many of members many of our members of had to alter their retirement plans as a result of these t s p losses one silver lining in the t s p has been the performance of the lifecycle funds thanks to the diversification provided by the alphonso losses from last year's meltdown on wall street were somewhat mitigated for those who chose them in fact the p lifecycle funds perform much better than similar funds in the private sector losses in the t s p's twenty ten on for example were less than half those experienced by investors in two thousand and ten funds offered by fidelity and vanguard one component of the three legged retirement stool and thanks to the two the other two legs guaranteed benefits from social security in the first basic annuity the losses incurred last year by federal employees in the t s p will not be catastrophic even for those close to retirement far too many workers in america have seen their defined benefit pensions cashed out and far too many workers are now exposed to excessive market risk in stand alone for one k s millions of workers have suffered a sickening blow to their retirement security as a result we all owe it to all of them to rebuild america's pension system once this crisis passes first would be a good model to emulate thank you again for inviting me to this hearing thank you sure appreciate that d created many changes for the t s p have supported passage of the bail but we did not support all of its elements we strongly supported a media agency contributions spousal benefits  the practice of other defined contribution programs to allow participants to have such a window largely because it imposes large and unnecessary risk and expand one of the main virtues of the t s p is it of an investor's return over time unless the t s p is able to negotiate comparable cost and profits with the investment management companies a f g believes it's not in the best interest of the plans participants to p account internal revenue service rules now let private sector employees contribute the value of their use or lose time off into their four hundred one k account as long as the employee would be eligible to receive the dollar value of then usually a lot at retirement federal employees can convert unused annual leave and to a lump sum at retirement federal employees are forced to use or lose annual leave the subject to limits on the amount of annually that can carry over each year when federal employees retire they are eligible to receive a lump sum of the dollar value of any unused annually unfortunately in order for the federal employees to be able to take advantage of the current or are asked rules regarding the deposit of dollars of unused paid leave and to their t s p accounts congress must demand the current while joins with others and urging the lawmakers to make this important change so the federal employees have the same opportunities for retirement savings as their counterparts in the private sector and state and local government when congress was working to develop the federal employees retirement system for a f g work hard to make sure that the legislation would require the establishment of an employer advisory committee for the t s p so that the concerns of the employee who finance the bulk of the plans assets would be heard and considered the law that was inactive did provide for such a forum and i'm happy to report that the employee thrift advisory committee has operated affectively  served a keep that all employees informed and educated on how to make the most of their opportunities under the law we also believe that federal employees and the investment board benefit from the union's ability to help determine the program to begin to obtain some of the virtues of the t s p with regard to efficiency accountability the last mr chairman is that we believe that he has been using a lot of president kelly i recognize thank you very much chairman lynch ranking member and other committee members for being here and for the opportunity to testify on recent developments and plans for the future of the federal retirement investment board our members have been generally pleased with the thrift savings plan and what we have found a low administrative overhead good return on investment and an open dialogue t s p administrative costs compare very favorably with private for a one k plans with input from employer organizations with informed and prudent leadership by the board and by the managers and with your oversight we think there are good systems in place and remaining an important part of the federal employees recent changes made to the thrift savings plan which have been talked about include the immediate contributions in the automatic enrollment provision and they have been noted and they are very positive developments for federal employees hopefully they will help employees  start saving for retirement immediately and to maintain or improve their savings rate as they move through their career work with the board to make sure that the automatic enrollment also includes an opt out provision so that employees  record keeping and calming systems while systems up will be needed to be monitored closely option as a welcome addition to the plan especially for younger workers however the board must be prepared to educate the funds have excellent opportunities to earn money on the retirement savings on the other hand we know there have been some participants who wanted to invest in certain types of stocks that are not available we look forward to the board's analysis of the cost benefit but both the i r s and the thrift board have indicated to enter that in order for federal employees to take advantage of president obama's initiatives legislation would be needed to amend the code while continuing to pursue this option along with other ask for your help mr chairman and for the subcommittee in working together to write passage of such legislation in closing we appreciate your oversight of the it is an important part of federal retirement we need to make sure that the deliberate review before any changes such as the mutual fund window are added the number one goal is to ensure stability integrity and cost efficiency in the t s p so that as this hearing title today states the fund will thrive and our retirees will prosper thank you and i'm glad to answer any questions thank you to recognize for five minutes are proud of nops work with congress in one nine hundred eighty six to create the thrift savings plan indeed by any measure the t s p has been a huge success despite the current fall of tile financial market we believe the recover but employees at or near over time and don't have that luxury most of them will either retire with a smaller nest egg or work until the market rebounds retirement plans were created so that employees could avoid working into old age and also to make room for younger workers to take their places as employers have migrated away from defined benefits and you know it is to defined contribution savings plans the burdens over time and liabilities and risk have been shifted from employer to employee but the purpose of retirement programs are negated when workers cannot afford to retire until they make up  ninety eight a proposal was made which you have undermined the first annuity and diverted the agency and employee contributions for it to a new and separate fund within the t s p this was and is a bad idea because it threatens the defined benefit of the first retirement stool which is evidenced by the recent market slump has become a safe essential safety net for workers still the social security leg of retirement is a road by the so called windfall elimination provision or w a p knob supports h r two thirty five legislation to repeal the w e p and the related government pension offset for years we have worked to improve the t s p by conforming it to four zero one k plan rules and by adding new features to the t s p which are consistent with the program's investment philosophy with your help mr chairman we are pleased with several t s p improvements became law in june for example the most important enhancement in the program's history was made when you really had federal employees will automatically enrolled in the t s p provided an immediate matching contribution now more federal employees will be better prepared for their retirement nop supported adding a roth option to allow participants to make off to tax contributions to the plan and withdraw their tax free upon retirement in addition we are happy the new law will give surviving spouses the same rights over their inherited accounts as any other p participant beyond these improvements we are concerned about the new self directed option to allow participants to invest their accounts in funds outside the t s p indeed the administrative cost incurred by funds be on t s p are usually much higher and many lacked the reduced risk on proven long term performance of t s p as well diversified index funds but that reason not be as the participants could take on too much risk we the strip board to consider limitations on fons invested outside of t s p to ensure the participants do not put all their eggs into one basket some  self directed option was included to placate interest in offering single sector funds in the t s p the thrift board has advised against adding such funds because they conflict with the program's diversified investment has been said president obama said that employees should have the option of putting payments for a new sleeve in today for a one case as a matter of equity not believes the federal workers should have this choice if it is offered to private sector employees knopf also supports a proposal to allow federal workers to contribute bonuses into their tax deferred accounts and while knopf seeks the means to maximize retirement savings we are concerned that the federal government does not do and not to educate its own workers saving for a time and we commend you for your interest in making this trip savings plan continued to trot friday and thank you for inviting us to testify thank you yes john botany are now recognized as five minutes chairman len chin distinguished members of the subcommittee i want to thank you very much for the opportunity to testify before this subcommittee on the perspective of the senior executives association relating to the thrift savings plan for the past ten years i have served as the representative of the senior executives association on the employee thrift advisory council i served as the chairman of s task force on retirement issues during the mid one nine hundred eighty s when both the federal retire federal employees retirement system and the thrift savings plan were created and  inception the thrift savings plan has not been a static retirement plan tack and its members have worked together to consider and implement new offerings to upgrade the thrift savings plan and make it more useful to its employees over the last decade such upgrades including adding the small cap and international funds to the original g fund large cap and fixed income funds and adding the option to invest in a life funds and providing access to a to thrift savings plan participants assuring that they can easily access information about their plan and access the account to manage their account their contributions the new features that significantly upgrade the thrift savings plan were signed into law by president obama and n s e a supports the passage of many of these features and believes that they will provide long term benefits much has been said already about the ross option and i would applaud that as well as the automatic enrollment of new employees but i want to take just a moment to talk about the beneficiary accounts for the surviving spouses prior to this change the spouses of the deceased federal employees had a choice of receiving a pay out of the thrift savings plan account in a lump sum or transferring the money into a rollover ira neither of these options was ideal as the lump sum payment had tax consequences and the rollover ira had higher administrative costs than the to a thrift savings plan as you've heard and the new law allows spouses who are the beneficiary of an account to keep the funds in the thrift savings plan and become the managers of these accounts that also rely leaves them of having to make an important financial decision in a time of grief this was pointed out to me by one of the members of the tac and i think it's a good point to make as a tack member who supported who proposed this addition to the thrift savings plan i was very happy to see it become law and very pleased with the federal retirement thrift investment board's prompt efforts to support its purpose and director long reported at the joint meeting of the board and the council on october nineteenth that it's already being used on the mutual fund window as ca has concerns about the mutual fund window it's necessary to study this option further to determine whether the cost of implementation is feasible and practical there's us we have a concern about the likelihood that this would overburden already strapped human resource and personnel offices and we did not at all clear that participants have the necessary investment expertise that would be needed to use a mutual fund window effectively because it's a riskier investment than traditional funds with that in mind the senior executives association urges the thrift investment board to take a cautious approach to open to opening the newly authorized mutual fund window as to looking for ways to improve the thrift savings plan the future there are two that we think would be very useful one is to provide the opportunity for employees who receive bonuses and performance awards to contribute those in  one some amount one percent ranging to one hundred percent directly into the thrift savings plan military members can do this already but it's not available for civilian employees  the bonuses are an important part of the compensation package especially for members of the senior executive service and the amount of money that a that a senior executive can contribute to their thrift savings plan is reduced compared with the employees in the g s system so we recommend that bonuses and performance awards be included as allowable deposits and now when when we talk to employees retire they receive a lump sum payments for their unused annual leave and they cannot make this cannot use this as a payout cannot use this payout to make a deposit i had the experience of talking with one federal retiree who woman who retired late in the year she received the payout or her annual leave in a lump sum when she received the i just have to let you wail be a time chairman distinguished members of the subcommittee on behalf of the three hundred seventy five thousand three hundred seventy five thousand members of the military officers association i'm grateful for the opportunity to present testimony on my views of recent legislative changes to the thrift savings plan and potential other enhancements that could benefit uniformed service members and their families the thrift savings plan and handsome an act of two thousand and nine part of public law one eleven thirty one signed into law in june of this year included to know the provisions for uniform service members and their families provisions that had full support the first provision made some modest future increases in payments to military federal civilian employees iraq savings option under the federal thrift savings plan a provision we have been advocating for since the advancement of the roth for a one in two thousand and six model is strongly support broad option under which participants prepay taxes on their contributions but watch their raw savings grow tax free enjoy tax free withdrawals in retirement providing iraq option will be especially attractive for young service members in lower tax brackets as well as career military people receive part of their current pay as tax free allowance is but can expect to have taxable retirement annuities moeller believes providing p option for currently serving personnel is an equitable and enlightened action which will improve their long term financial security the families of our service members surely deserve this option in light of their contributions to our nation since the passage of the act we are grateful the thrift savings plan website has been very proactive taking a very proactive approach by posting to inform the fact sheets one outlining the legislative changes to the thrift saving plan for federal employees and service members and another the provides frequently asked questions and answers the q and a fact makes the following statements mo intends to follow closely during the upcoming implementation period that uniform members and federal employees could see a raw t s p implementation as early as january of two thousand and eleven the second outlines that there will be no income restrictions on roth t s p contributions and finally the third outlines of thrift savings plan will develop a plan to educate eligible users on the relative advantages and disadvantages of the roth vs regular t s p we believe this third bullet is crucial service members must be provided was first introduced we recommend that with the implementation of iraq t s p military and federal employees should be offered the option of converting some or all of their existing accounts to raw t s p accounts regardless of their modified adjusted gross income providing the conversion option is a win win for both the participants and the federal government especially in the current national deficit environment participants win by having the option to convert pay taxes now and have their t s p earnings grow without tax liability upon withdrawal additionally the federal government wins by garnering more tax revenues now additionally most supports a change either in policy or law that would allow uniformed service members to enjoy the same t s p contribution options that federal employees presently enjoy currently service members can only elect a whole percentage option for p contributions federal civilian employees have the option to contribute their dollar amount or percentage of a play percentage of pay we believe that providing a fixed dollar amount option would simplify the process for the service members finally as stated before we believe a thorough education plan will be instrumental to ensure the roth rollout is implemented most effectively there florimel recommends that t s p bring affected agencies together to include federal agencies and military and veteran service organizations in roundtable discussions to assist in developing the rollout education plan and necessary rulemaking policy we feel a collaborative effort will produce a much more comprehensive result in conclusion mo is grateful to the subcommittee for its leadership on this issue and for the commitment of both congress and the federal retirement thrift investment board to providing this need much needed saving option for federal employees and uniformed service very happy with the way the press savings plan works as a participant that's my own assessment and i think it's very good i agree with my was testimony of the it's been a great  deposit i think that's a great idea i think is out there already for the i r s approved shame and often not anticipating that we could have put it in the previous bill but i have talked to the ranking member he's receptive to it so i understand both the arguments but i think there might be a way to to address all those concerns and still allow some flexibility here and that might be and i'm just suggesting representatives have and also some of the retirees representative raised about making sure that the cost structure there is not prohibitive and other ways to participate and be eligible through and the policies behind it i do not think as far as the vast majority of participants appreciate the fact that we have a small number of easily understood investment options the vast majority of them buy and hold and i don't think that's going to change nor do i think it should i think this leads up to the question of the mutual fund when is it appropriate can we figure out a way to make it work right and there are a small number of participants that will i think in  always if the structure doesn't change will always say well we should have the gold fund the real estate's on the socially conscious on the net and there's an unending list of the whatever fun fill in the blank  if we seek a way to come up with a solution for the small portion of the population without doing anything to change the what affects the other ninety eight percent of participants that won't use a mutual fund window isn't a is a way to get there you can structure it in such a way that the cost of the mutual fund window the people who use it are the only people who pay for it people who don't use it don't pay a nickel for it and i think that's that's critical and we certainly have anticipated that we would limit the the total amount of a person's account that could go there the exact number whether it's fifty percent or twenty five percent is certainly a pretty basic but the fundamental policy of the t s p simplicity should not change thank you i yield to the ranking member for five minutes thank you its chairman thank you all for your for your testimony and your comments just mentioned about the mutual funds at least as an approach i would suggest that the idea of choice is a good one that individuals are different stations in life a different backgrounds whether they've inherited certain things they could there's such an unending array of possibilities but i think to the idea that they can be properly educated and understanding the risks that they're not just going on making a quick decision that fifteen years from now they may regret but they can also understand the risk and reward of maybe they want to be a little bit more aggressive i would i would hope and encourage and support efforts to move down that path in a cautious way but at the same time ultimately allowing the individual some some degree of choice and i would support that push on on the mutual police from the mutual funds point  mr lamb a freshman i'm coming to understand these issues and dive deeper into these you made quite an assertion about the low administrative costs and i've certainly heard that far and wide but it's also my understanding that many of these costs are to furred if you will and pushed over just for instance treasury and other proofs where you're not actually having the expense actually the taxpayers the united states are tied in those expenses can you help me understand how self sufficient and cohesive this group is as opposed to and what percentage and what dollars we're talking about are actually shared assets within the federal government and which are ultimately played by all the tax payers the united states not just the participants within the t s p the t s p does rely on human resource personnel throughout the government so every but every agency has a certain number of personnel specialist that are required to pass out  the do we have a sense of our budget is this amount of money and it takes this percentage of no is the short answer and i do know that one of my predecessors was asked this question years ago and the they were not able to get to an answer and thought it was we were chasing our tail trying to end our time is short you know you have five minutes and i'm sure we can go a couple rounds but it's some point i think that's an important number to understand the self sufficiency again in the big scheme of a three point nine trillion dollar budget but to me the principle of being self sufficient allowing the participants to pay for the administrative costs i think is an important one that we're at a time when we're twelve trillion dollars in debt and this is certainly they're to nitpick little things with him but at the same time i think the principle of self sufficiency is an important one i was also go back to and i would love to follow up with you and try it some point to tackle if that's ok with you  complicated yes it is this is any going to be why it takes two years to try to get to implement something that is right around the found right now and i'll just explain the payrolls which has nothing to do with us all throughout the government changed say ok your your paycheck is reduced but a portion of that which is pretax standard for one k reduces your taxable income but the other amount that's still going to go to the same for one k plan is going to rot and so you're going to be removed from your paycheck but it's included in your tax income that is a from a just from a payroll side only that's an enormous change that from our standpoint we are right now implementing software changes to be able to expect for our systems to be able to accept that you've got record keeping train just you've got communication changes so really what it boils down to the the other changes on immediate contributions also big deal that we're able to do it quickly automatic enrollment a big deal but not half as big  as roth is an enormous project if there are ongoing challenges things that change the equation if there's any way to speed up the timeline will you please let us know i think we keep abreast of this and not take years to get through this process you stated in your testimony mr long that the i fund currently incurred trading costs falling from roughly sixteen point five million dollars in two thousand and seven to only two point one million in september how much give me a sense of what's happening there is that because there's lower you know the the economic environment has dwindled or what are the factors that are we had a small group of less than one percent of the total population that was effectively active traders they were moving large amounts of money back and forth so a small population large making large transfers on a daily basis so every day we bundle up all of our total trades and and submit a net trade  set a policy where two per month unlimited reduce the trading activity therefore reduce the volume of the trades that we submit in the market each day therefore drastically reduced our expenses bottom line is the likelihood of how many participants would use it and it's in the single digits it's probably somewhere between one and four percent really yeah maybe small given the concerns you've heard raised table and  then it's only one of why we want to pursue well we want to get from the the eight out of ten to a nine out of ten and eventually a ten out of ten what you find is you have a small but very vocal group of disaffected participants and do you in the end do you want to provide solutions that help everybody what we can do here is the for the participants that say i am i am very unhappy because i can't execute my desired trade in a in an equity fund that does not invest in oil companies that does not invest in tobacco companies that does not invest in companies which  support non democratic non democratic regimes or does not permit me to execute my my investment belief that that japanese airlines are going to be the best investment in two thousand and ten if we want to create my method by which of those participants can execute their investment beliefs on mutual fund is a way to get that done it is generally recognized by the consultant community that the the ideals fo kate design is a core group of small very broadly diversified funds exactly what we have today in the five funds plus a small menu of lifecycle funds which we have today and then add to that for the small group of self directed for the people that are on the front tier offer them a window to execute their own independent beliefs that that's a way to get it done we're not doing anything to move forward and less the members of the had a fund at that point yes i think the the participants in that would not have been happy and what we're talking about here is something different is that is not creating a new core fund but creating a window by which a small number of participants with the appropriate protections to say before you go through this window understand there are risks there are expenses this is not for the novice investor but if you choose to invest a portion of your money in a mutual fund through this window people that we're serving here how best is now we're going to have to have it with the roth ira that's going to have to be explained already what we're doing already the you know very likely that the  investment principles so effectively talking about strategies to communicate that to four point two million people is going to be a challenge the mechanisms for how we get that done certainly will be relying on the website certainly we will be relying on the  of our organization has done no cost analysis associated with that again as we see this as more of a win win for both the federal government as well as for the members because of the revenues will be coming back to the federal government immediately  that's that's the option that we're looking at is having some type of conversion and carl hayden the military employee or military folks in the military are are they subject to the same kind of  s employees with respect to the match the one percent it's my understanding they're more towards just the annual contributions to the sixteen five or the forty nine thousand we do have a limitation associated with the forty nine the uniformed services are not eligible for any government contribution again with a similar strategy that they have a a pension a twenty year pension which is deemed to be considered to be attractive and that's their primary source of their retirement you know where the fact that the ranking member of the full committee had a memo that would in fact allow the military to qualify for a match similar to one point not was not might be worth your costing out the implications under tax law what is permissible today is the conversions abroad of regular iras and roth iras but that's the thinking behind it might be similar but not inside the qualified plan role does not permit margaret  i didn't ask you for position but what is narced position on creating new investment windows especially maybe a mutual fund  hand when we're looking at something that is a retirement fund we have to balance balance out not so long ago the previous administration had strongly suggested the critical when we first had the option of participating in this now provides even broader base of depending on your financial situation depending on what your tax brackets going to be it's going to be even more critical  o have an understanding of what they intend to have taxable income in retirement compared to their taxable income that they're currently looking at and when you throw in that some of these folks are deploying into the combat zone before the roll out of the roth is that the services will do once again we call them roads we would take our h r personnel get them smart on the go out and have mandatory  mandatory formations where you would have to go out and get the briefing so they had an understanding of exactly what this was being provided and we have that option with the uniformed services to do something just like that the website is going to be and we are but i think we have to do so with a certain degree of caution as to the interests of the people that we represent these participants now and in the future but i want to thank you very much for your willingness to come before the committee and help us with our work we have benefited greatly by your perspectives and by your recommendations i can't i can't guarantee that you won't be asked to appear here again