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S. Hrg. 110–934 

NOMINATIONS OF HON. ANDREW M. SAUL, HON. 

ALEJANDRO M. SANCHEZ, AND HON. GORDON 

J. WHITING 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

ON THE 

NOMINATIONS OF HON. ANDREW M. SAUL TO BE CHAIRMAN, FEDERAL 

RETIREMENT THRIFT INVESTMENT BOARD; HON. ALEJANDRO M. SANCHEZ AND HON. GORDON J. WHITING TO BE MEMBERS, FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 

APRIL 10, 2008 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

KRISTINE V. LAM, Professional Staff Member 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

JENNIFER L. TARR, Minority Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Akaka .................................................................................................. 1 

Senator Voinovich ............................................................................................. 2 

WITNESSES 

THURSDAY, APRIL 10, 2008 

Hon. Bill Nelson, a U.S. Senator from the State of Florida ................................. 3 

Hon. Mel Martinez, a U.S. Senator from the State of Florida ............................. 3 

Hon. Andrew M. Saul to be Chairman, Federal Retirement Thrift Investment 

Board ..................................................................................................................... 6 

Hon. Alejandro M. Sanchez to be a Member, Federal Retirement Thrift Investment Board .................................................................................................... 7 

Hon. Gordon J. Whiting to be a Member, Federal Retirement Thrift Investment Board ........................................................................................................... 8 

ALPHABETICAL LIST OF WITNESSES

Martinez, Hon. Mel: 

Testimony .......................................................................................................... 3 

Nelson, Hon. Bill: 

Testimony .......................................................................................................... 3 

Sanchez, Hon. Alejandro M.: 

Testimony .......................................................................................................... 7 

Biographical and professional information ..................................................... 39 

Responses to pre-hearing questions ................................................................ 45 

Letter from U.S. Office of Government Ethics ............................................... 50 

Saul, Hon. Andrew M.: 

Testimony .......................................................................................................... 6 

Prepared statement with an attachment ....................................................... 17 

Biographical and professional information ..................................................... 23 

Responses to pre-hearing questions ................................................................ 31 

Letter from U.S. Office of Government Ethics ............................................... 37 

Whiting, Hon. Gordon J.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 51 

Biographical and professional information ..................................................... 52 

Responses to pre-hearing questions ................................................................ 60 

Letter from U.S. Office of Government Ethics ............................................... 67 

(1) 

NOMINATIONS OF HON. ANDREW M. SAUL, 

HON. ALEJANDRO M. SANCHEZ, AND HON. 

GORDON J. WHITING 

THURSDAY, APRIL 10, 2008 

U.S. SENATE,

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 2:14 p.m., in Room 

SD–342, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 

presiding. 

Present: Senators Akaka and Voinovich. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. The hearing will come to order. I want to welcome our witnesses, especially my colleagues, the Senators who are 

here. I would like at this point in time—Senator Voinovich, do you 

want to go first and make a statement? 

Senator VOINOVICH. No. That is fine. 

Senator AKAKA. Today, the Committee on Homeland Security 

and Governmental Affairs meets to consider the nominations of Andrew Saul, Alex Sanchez, and Gordon Whiting to be Members of 

the Federal Retirement Thrift Investment Board (FRTIB). 

Mr. Saul, currently serving as Chairman of the FRTIB, is a general partner in the firm of Saul Partners, a diversified investment 

firm, and the director of Cache, Inc., a specialty retailer of women’s 

apparel in New York. 

Mr. Sanchez is currently the President and CEO of the Florida 

Bankers Association. 

And Mr. Whiting is the Managing Director and Partner of Angelo, Gordon and Company, LLP, in New York, and a graduate of 

Columbia Business School. 

I see that Senator Nelson and Senator Martinez are here to introduce Mr. Sanchez, and I also know that my Ranking Member is 

also tight for time. And so I would like to ask that my Ranking 

Member go first, and then I will have the two Senators introduce 

Mr. Sanchez. 

[The prepared statement of Senator Akaka follows:] 

OPENING PREPARED STATEMENT OF SENATOR AKAKA 

This hearing will come to order. 

Good afternoon. 

2 

Today, the Committee on Homeland Security and Governmental Affairs meets to 

consider the nominations of Andrew Saul, Alex Sanchez, and Gordon Whiting to be 

members of the Federal Retirement Thrift Investment Board. 

Since being confirmed by the Senate in 2002, you all have served on the Board 

and provide direction and oversight as fiduciaries of the Thrift Savings Plan (TSP). 

As you know, the TSP is a long-term, retirement investment fund, similar to a 

401(k) in the private sector, that allows enrollees to invest in five publicly traded 

index funds with varying degrees of risk: 

• The Government Securities Investment Fund, or G Fund with the lowest 

amount of risk; 

• The Fixed Income Index Investment Fund or the F Fund; 

• The Common Stock Index Investment Fund or C Fund; 

• The Small Capitalization Stock Index Investment Fund or S Fund; and, 

• The International Stock Index Investment Fund or I [Eye] Fund, which has 

the highest degree of risk. 

At the time of your nomination hearing in 2002, the TSP was involved in a number of contentious issues including the computer modernization system. We are in 

a very different place today. 

Acording to a 2006 survey of participants by Watson Wyatt Worldwide, 85 percent 

of respondents are satisfied or very satisfied with the TSP, whereas 68 percent of 

participants in private sector 401(k) programs are satisfied with their plans. More 

importantly, only 3 percent of survey respondents were dissatisfied with the TSP. 

Participation in the TSP has grown to over 3.8 million military and civilian participants and roughly a quarter of a billion dollars, while administration costs have remained low at approximately two basis points. 

It is evident that you all have taken your fiduciary duties seriously by keeping 

costs low and making improvements to the Plan to ensure that Federal employees 

have comparable benefits to the private and public sector. For example, the introduction of the Lifecycle Funds, or L-Funds, allows participants who are not investment savvy the opportunity to improve their retirement growth potential. 

In addition, you contracted with the investment consulting firm of Ennis Knupp 

to determine if there were any gaps in the investment options available to Federal 

employees. In October 2006, the consulting firm concluded that the core investment 

structure was sound and that there were no gaps in the investment line-up for the 

TSP. 

Looking to the future, more changes to improve the Plan are on the horizon. The 

Board has proposed auto enrollment of all Federal civilian and military employees 

and making the L-Funds the default investment Fund. The Board also is looking 

into the possibility of adding a Roth-like plan to the available options. 

However, as all of these changes are made and more options are examined, I 

would like to stress the importance of financial and retirement literacy. Participants 

must be able to take advantage of the Plan’s full range of options in order for it 

to be successful. 

It is imperative the TSP participants fully understand the plan and how it works 

so that Federal employees can prepare for their retirement. I look forward to hearing from all of you on how you think financial literacy can be improved. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Thank you, Mr. Chairman. 

First of all, I want to thank each of you for your service. I am 

going to ask that my opening statement be made part of the record 

so that we can hear from Senator Martinez and Senator Nelson. 

Senator AKAKA. It will be made part of the record. 

[The prepared statement of Senator Voinovich follows:] 

PREPARED STATEMENT OF SENATOR VOINOVICH 

Good afternoon. Chairman Akaka, thank you for calling today’s hearing to consider the nominations of Mr. Saul, Mr. Sanchez, and Mr. Whiting to the Federal 

Retirement Thrift Investment Board. 

First, I would like to thank each of you for your service during the previous five 

years and for your willingness to serve another term. 

The Federal Retirement Thrift Investment Board holds the fiduciary responsibility for the Thrift Savings Plan for Federal employees. With combined assets exVerDate Nov 24 2008 10:02 Nov 30, 2009 Jkt 042746 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 P:\DOCS\42746.TXT SAFFAIRS PsN: PAT
3 

ceeding $222 billion (as of February 2008), it is the largest defined contribution plan 

in the world. 

We all know too well the challenges facing the Federal workforce: 60 percent will 

be eligible to retire within the next 5 years, including 90 percent of the Senior Executive service. According to the Partnership for Public Service, the government will 

need to hire 193,000 new people to fill mission critical jobs in the next 2 years. 

These challenges no doubt will have an impact on the Board as the number of participants and the size of the plan continually increases. 

As a nation, we face a challenging financial future. Troubles in today’s economy 

significantly impact the TSP. For example, TSP participants lost approximately $8 

billion from December 2007 to February 2008. 

Additionally, individual Americans’ financial situations are not necessarily better. 

The most recent Federal Reserve survey of Consumer Finances estimated the average credit card debt was $5,100. Furthermore, and the Department of Commerce 

has identified a worrisome trend of a negative personal savings rate. 

Chairman Akaka, it is fortunate that we are holding this nominations hearing in 

April, which is Financial Literacy Month. I know this is an important issue for you, 

and that the board plays a key role in educating our Federal employees on retirement planning. 

I look forward from hearing from the nominees on the successes they have 

achieved during their first term as Board members and how they will meet challenges ahead. 

Thank you. 

Senator AKAKA. Thank you very much. And I know you have 

busy schedules, Senator Nelson and Senator Martinez, and I would 

ask you to make your introductions at this time. 

TESTIMONY OF HON. BILL NELSON, A U.S. SENATOR FROM 

THE STATE OF FLORIDA 

Senator NELSON. Mr. Chairman, it is a pleasure. You have already noted that Alex Sanchez is the CEO of the Florida Bankers 

Association, and I think one of the strongest recommendations that 

I could give for him is not only what we know about him in Florida 

and those credentials which we testified about here when he was 

first confirmed to this Board, but the fact that these Board members seated at this table all get along so well and have brought 

order out of chaos that had previously been on this Board, and as 

a result of not only their professionalism but their personal relationships in working together, you now have a functioning Board 

in what the law intended. And so I think that is about as good a 

recommendation that I could give not only for Alex Sanchez but for 

his colleagues as well. 

Senator AKAKA. Thank you very much, Senator Nelson. Senator 

Martinez. 

TESTIMONY OF HON. MEL MARTINEZ, A U.S. SENATOR FROM 

THE STATE OF FLORIDA 

Senator MARTINEZ. Thank you, Mr. Chairman, and thank you, 

Senator Voinovich. I am delighted to be here once again to recommend Alex Sanchez to the Committee. 

I share a similar background with Mr. Sanchez. We both immigrated to this country. We both love America. He exhibited that 

love of his country by being a member of the Air Force and serving 

the Nation in that way. 

Alex Sanchez is one of those people who has an infectious enthusiasm for everything that he does. He not only is a terrific president of the Florida Bankers Association where he does a tremendous job of representing the interests of Florida bankers—they love 

4 

him; they know what a tireless worker he is—but he also serves 

his State on the Florida Schools of Excellence Commission and, of 

course, is willing to now serve another term in this very important 

Board, Federal Retirement and Thrift. 

I am impressed by his willingness to serve, and I know he will 

continue to do the great job that he and his colleagues have obviously been doing. So I am delighted to be here for him today, and 

I am delighted to join with my colleague, Senator Nelson, in presenting Alex Sanchez to the Committee once again and wish him 

well in hopeful second term. 

Senator AKAKA. Well, I thank you, Senator Martinez and Senator 

Nelson, for your support. 

Senator NELSON. Thank you. 

Senator AKAKA. Since being confirmed by the Senate in 2002, 

you all have served on the Board and provided direction and oversight as fiduciaries of the Thrift Savings Plan (TSP). At the time 

of your nomination hearing in 2002, the TSP was involved in a 

number of contentious issues, including the computer modernization system, and we are in a very different place today. 

Over the past 5 years, changes have been made to improve the 

investment options for participants, the administration of the plan, 

and the participation within the TSP. Most recently, the Board decided to limit the number of inter-fund transfers for participants 

from unlimited transfers per month to two transfers per month, 

with unlimited transfers to the G Fund. 

While I understand this is not uncommon among private sector 

plans, we have worked hard over the past few years to give participants more flexibility in managing their TSP accounts, and I am 

interested in hearing more about the need for this regulation to restrict participants’ ability to freely manage their retirement funds. 

As you may know, April is Financial Literacy Month, and I am 

a strong proponent of improving financial literacy. As more changes 

are made and more options are examined, I believe the plan’s success relies heavily on properly educating the participants. 

It is imperative that Federal employees be educated in their investment and benefit options in order to make sound financial decisions, avoid unnecessary pitfalls or setbacks, and secure their retirements. TSP participants must fully understand the plan and 

how it works to prepare for their retirement. 

So I look forward to hearing from all of you on how you think 

financial literacy can be improved. 

I would like at this time to ask Senator Voinovich—I know he 

did ask that his statement be placed in the record—whether he 

wanted to make any statement at this time. 

Senator VOINOVICH. All I want to say is that I have had a very 

good relationship with the TSP Board. We have the folks in to talk 

about opening up some new accounts, and I think that they have 

acted responsibly, and you folks have a very heavy burden on your 

shoulders because your decisions are going to have a lot to do with 

the retirement of our Federal workers, and I think that the issue 

of educating our Federal workers as much as possible is something 

that you ought to work on as aggressively as possible because we 

know we are going to be losing a lot of people through retirement. 

And I think that you ought to crank up in anticipation of that so 

5 

that folks really understand it, maybe have seminars around the 

various offices so that folks really know what options are available 

to them so that they can make good decisions. 

Thank you. 

Senator AKAKA. Thank you. The rules of this Committee require 

that all witnesses at nomination hearings give their testimony 

under oath. And, therefore, I ask that the witnesses please stand 

and raise your right hand. Do you solemnly swear that the testimony you are about to give this Committee is the truth, the whole 

truth, and nothing but the truth, so help you, God? 

Mr. SAUL. I do. 

Mr. SANCHEZ. I do. 

Mr. WHITING. I do. 

Senator AKAKA. Thank you very much. 

Let the record note that the witnesses responded in the affirmative. 

At this time I understand there is a vote on the Floor, and so 

I am going to call for a recess. We will run over there and vote, 

and I will be right back. So thank you very much for your patience. 

The Committee is in recess for a few minutes. 

[Recess.] 

Senator AKAKA. The Committee will be in order. I want to commend you for your patience. [Laughter.] 

I look forward to your testimony. 

I understand that the witnesses have some family and friends in 

the audience, and I want to give you the opportunity to present 

them formally to the Committee. So let me start with Mr. Saul. 

Mr. SAUL. It is just myself. 

Senator AKAKA. Mr. Sanchez. 

Mr. SANCHEZ. Thank you, Mr. Chairman. 

First of all, let me just say that when you enter our house, my 

home, Mr. Chairman, your photograph is there with my two daughters and my wife—from 5 years ago. Unfortunately, as your children get older, you cannot control their schedules that much. My 

youngest daughter’s tennis high school championship is today, so 

she could not make it. And my oldest daughter has finals. She 

graduates from college this month. My wife stayed behind with 

them, so they cannot be here. But I want to say, sir, that my 77- 

year-old mom, Hilda, is here behind me. 

Senator AKAKA. Welcome. 

Mr. SANCHEZ. And my friends Rick and Sheryl Lee are also here 

from Florida, sir. 

Senator AKAKA. Welcome. 

Mr. SANCHEZ. So it is great to have them here, Mr. Chairman. 

Senator AKAKA. Well, thank you very much. Good to see all of 

you, and please pass my best regards to your family. I really appreciate that. 

Mr. SANCHEZ. Thank you, sir. 

Senator AKAKA. Mr. Whiting. 

Mr. WHITING. Thank you, Mr. Chairman. Today I am joined by 

my father, William G. Whiting, and I am very glad that he can be 

here. Thank you. 

Senator AKAKA. Thank you. Welcome. Good to have all of you. 

6 

1The prepared statement of Mr. Saul with an attachment appears in the Appendix on page 

17. 

Well, again, I am happy to have you here, and I am looking forward to your opening remarks. So let me call on Mr. Saul. 

TESTIMONY OF HON. ANDREW M. SAUL 1 TO BE CHAIRMAN, 

FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 

Mr. SAUL. Mr. Chairman, first I would like to say I am very 

proud to be here again sitting before you, and I thank you very 

much for holding this hearing. 

Mr. Chairman and Members of the Committee, my name is Andrew M. Saul. Since my confirmation by the Senate in November 

2002, it has been my privilege to serve as Chairman at the Federal 

Retirement Thrift Investment Board. I am appearing today with 

my colleagues on the Board and fellow nominees, Gordon J. Whiting and Alejandro Modesto Sanchez. We thank you for holding this 

hearing today. 

When my colleagues and I appeared before you for our previous 

confirmation hearing on November 15, 2002, you were very direct 

in advising us about the challenges we faced at the Board. You described an institution with a failed modernization program, terminated contracts, and multiple lawsuits. Disagreements between the 

former leadership and Executive Branch departments were very 

public and combative. You further noted the lack of useful information on the TSP website. Your candor was appreciated and extremely useful as we set out about getting the Board back in the 

business of providing retirement security to Federal employees and 

members of the uniformed services. 

In an orderly and businesslike fashion, during open public meetings, this Board attended to the problems you cited. We worked 

with the senior career staff to put the new recordkeeping system 

in operation just 6 months after taking office. We hired a new executive director who settled the lawsuits. We improved the TSP 

website and have made it, along with our toll-free telephone service 

centers, the gateways for service and up-to-date information. 

The TSP today is a very different plan than it was in 2002. We 

transact business on a daily-valued platform and have built in 

redundancies to ensure continuity of business. We introduced the 

new life cycle funds which provide automatic, professionally designed asset allocation. Participation has grown from 3 million to 

3.9 million individuals, and balances on accounts have increased 

from $98 billion when we arrived to $223 billion today. All of this 

and more has been accomplished at the same time that costs to 

participants have declined from seven basis points, 70 cents per 

$1,000 of account balance, in 2002 to one and a half basis points, 

15 cents per $1,000, in 2007. 

During our 2002 confirmation hearing, you noted that the TSP 

website did not include information regarding Board member or 

governance activities. That has been remedied, and we now also include information on the Employee Thrift Advisory Council and 

their meetings. As for other useful information, if you look at our 

home page this month, you will see a scrolling marquee drawing 

attention to the fact that April is Financial Literacy Month. 

7 

Mr. Chairman, the Akaka amendment to the TSP Open Enrollment Act of 2004 refocused attention on this critical area. We now 

file a report annually with the Committee to report our ongoing efforts regarding financial literacy. So far this year, agency staff has 

scheduled 305 educational sessions, including 55 for agency and 

service representatives and 250 employee briefings. Eighteen of the 

latter are major conferences and benefits fairs, including one scheduled for Legislative Branch employees later this month. 

Finally, Mr. Chairman, we are all very pleased that TSP participation by members of the uniformed services has grown from 

282,000 to 602,000 since we took office. We made special efforts to 

work with the services in this regard and will continue to do so. 

The TSP is so well conceived and designed by Congress—and this 

Committee in particular—it has been called ‘‘possibly the best single savings vehicle in America today’’ by legendary Vanguard Mutual Fund founder John Bogle. We agree, and we pledge, to continue to do all that we can to keep it attractive and useful to the 

fine men and women who serve our Nation. 

I appreciate the opportunity to appear before you and to serve 

those who have served us all so well. And, Senator, if I may just 

say on a personal note, in my varied career—which has been very 

varied—I have been involved in, fortunately, many different things 

and most of them successful. This public service that you have afforded me, this opportunity to serve our Nation and give back 

something, is one of the things I am truly, sincerely most proud of. 

I feel that with myself and my fellow Board members who appear 

before you and the staff, we have really made this a first-class 

agency, and it is one of the most important things that I have done 

in my life. And I thank you, Senator, for giving me this opportunity 

and hope you will afford me that opportunity going forward. 

Thank you, sir. 

Senator AKAKA. Thank you very much, Mr. Saul. 

Mr. Sanchez, please proceed with your statement. 

TESTIMONY OF HON. ALEJANDRO M. SANCHEZ TO BE A MEMBER, FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 

Mr. SANCHEZ. Thank you, Mr. Chairman. And again, Mr. Chairman, I want to start with Mr. Saul’s last comment. Five years ago 

we received confirmation from this Committee and then the full 

Senate, and as I said to you 5 years ago, sir, as an immigrant to 

this country, I cannot tell you what an honor it is for my family 

and for myself to serve our government in this capacity. Along with 

Mr. Whiting and Mr. Saul, we have really put our heart and soul 

into this, taking the time to make sure that we are there to properly give this agency the time that it required in service to our Nation, sir. And it is a tremendous honor for us. That honor has not 

faded. It has not been watered down. It is as strong today as it was 

5 years ago, and, again, I ask you, sir, if we are afforded the opportunity for a second term, I assure you, sir, that the three of us will 

continue to work very hard for the agency. 

It has been a great 5 years, Mr. Chairman. I think we have a 

lot of things positive that have been done, and I think that from 

a personal perspective, Mr. Whiting and Mr. Saul—the three of us 

feel very strongly about the benefits of this great plan that this 

8 

1The prepared statement of Mr. Whiting appears in the Appendix on page 51. 

Congress has afforded those Federal workers and men and women 

in the military, what we feel very proud about is that this plan has 

reached and penetrated deeper and deeper—every month the numbers go up for those who are serving our country at this hour. I 

think that is very important because those courageous men and 

women serving in uniform, defending our Nation, really need to 

benefit from the TSP. 

When the numbers come in every month at the Board meeting, 

we see that we have reached over 50 percent in the Navy in active 

duty, sir. A third of the Marine Corps are now in this plan. Over 

a third of the Air Force active duty is participating. Over a third 

of the Coast Guard and over 25 percent, a quarter, of the Army is 

participating. The three of us really feel like we have really done 

something here to help those courageous men and women. So that 

for us is a big thing that means a lot to us personally to make sure 

that this plan—because these men and women are all over the 

world and, we have done the marketing pieces, we have improved 

the website, to make sure that the word gets out not only to those 

courageous men and women in our armed services, but the Federal 

workers as well so that they will realize the benefits of the TSP 

and their participation numbers will continue to rise as well. 

But, we have things like the life cycle funds, Mr. Chairman, to 

make it easier for the Federal workers and the participants to invest for their retirement, and increased education; we have a great 

professional staff now. We have a deeper bench on the professional 

staff, which only benefits, again, the participants. I think those are 

some of the things that we have done these last 5 years that we 

will continue to focus on to make sure that this agency is providing 

the best possible services for its participants, sir. 

Thank you. 

Senator AKAKA. Thank you very much, Mr. Sanchez. Now we will 

hear from Mr. Whiting. 

TESTIMONY OF HON. GORDON J. WHITING1 TO BE A MEMBER, 

FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 

Mr. WHITING. Mr. Chairman, my name is Gordon J. Whiting, and 

I too would like to thank you, other Members of the Committee, 

and the staff for conducting this hearing today. The Thrift Savings 

Plan has become a critical element for the retirement security of 

nearly 4 million Federal employees and members of the uniformed 

services. It has been my privilege to serve as a plan fiduciary and 

member of the Federal Retirement Thrift Investment Board. I am 

grateful for the opportunity to continue this service. 

When I last appeared before you in 2002, you focused my attention on two issues: Working cooperatively with other agencies and 

ensuring that participants have the financial knowledge to make 

informed decisions. I want to assure you today that we have continued to pursue these goals with notable success throughout my tenure. 

In today’s fast-paced financial world, we need to be sure that the 

TSP remains nimble yet grounded in the fundamental principles 

established for it in law. You have my commitment today that I 

9 

will continue down that path, exercising both prudence and deliberate speed. 

Thank you again for your consideration of my nomination to this 

important position. 

Senator AKAKA. Thank you very much, Mr. Whiting. 

I will begin with the standard questions this Committee asks of 

all nominees. Is there anything you are aware of in your background that might present a conflict of interest with the duties of 

the office to which you have been nominated? Mr. Saul. 

Mr. SAUL. No, sir. 

Senator AKAKA. Mr. Sanchez. 

Mr. SANCHEZ. No, sir. 

Senator AKAKA. Mr. Whiting. 

Mr. WHITING. No, sir. 

Senator AKAKA. Thank you very much. 

Do you know of anything, personal or otherwise, that would in 

any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated? Mr. 

Saul. 

Mr. SAUL. No, sir. 

Senator AKAKA. Mr. Sanchez. 

Mr. SANCHEZ. No, Mr. Chairman. 

Senator AKAKA. Mr. Whiting. 

Mr. WHITING. No, sir. 

Senator AKAKA. Do you agree without reservation to respond to 

any reasonable summons to appear and testify before any duly constituted Committee of Congress if you are confirmed? Mr. Saul. 

Mr. SAUL. Yes, sir, I do. 

Senator AKAKA. Mr. Sanchez. 

Mr. SANCHEZ. Yes, sir, I do. Thank you. 

Senator AKAKA. Mr. Whiting. 

Mr. WHITING. Yes, Mr. Chairman, I do. 

Senator AKAKA. I thank you all for your responses. Now let me 

ask a question to the entire panel. 

Federal Reserve Chairman, Ben Bernanke, testified before the 

House last week that a recession is possible. Within the last few 

months, the economy lost nearly 80,000 jobs. Home values continue 

to fall, and the credit markets have tightened. Understandably, 

TSP participants are concerned about the impact of recent events 

on their retirement. 

How is the TSP doing in light of the recent events? And what 

would you say to concerned TSP participants? Mr. Saul. 

Mr. SAUL. Well, Senator, unfortunately, we have had 5 years of 

tremendous growth in the economy and tremendous growth in the 

financial markets, and the TSP participants have obviously participated in this great fortune. We have had a rough quarter. There 

is no question about it. The financial markets are down about 8 

percent, roughly, for the first 3 months of the year. And our plan 

is an index fund plan, which does track the markets. So, depending 

on the allocation that the individual has, they, of course, unfortunately, have suffered losses. 

Now, I think it is very important, and what I would say to the 

participants is the following: Over a period of time, as this is a 

long-term savings plan, this is not to be judged on one quarter or 

10 

two quarters. A properly allocated plan is a future retiree’s best defense against an uncertain economy. 

And I might call attention to the life cycle funds, which we introduced in the last 2 years. And I think over a period of time and 

if you track their performance for the first quarter, I think they 

have done very well and done just as they were conceived. So that 

somebody that is closer to retirement who is in the life cycle funds 

with a get-out date closer to the present date, they have a much 

higher allocation of bonds and G Fund, which is short-term Treasuries, in their mix. And those younger people that are working for 

the Federal Government have a larger percentage of equity, but 

they have a longer time to be able to recover if we do have a down 

quarter. 

So I think that a properly allocated plan, as I think we have and 

I think that most of our participants have, is the right thing for 

the long term. And while there will be short-term interruptions, as 

we go forward I do believe that that is the proper way to invest, 

and I encourage people that are not sophisticated, financial-market-orientated people to please take a look at our life cycle funds, 

because I do think that is the right approach for uncertain times 

like this. And I would encourage whatever participants that look 

and hear this testimony today to relook at the L Fund performance. 

Senator AKAKA. Thank you very much, Mr. Saul. Mr. Sanchez. 

Mr. SANCHEZ. Mr. Chairman, as Mr. Saul said, this is really a 

long-term savings plan, and, yes, I know we have—in the last 

months now, we have had turbulent times on Wall Street obviously 

affecting the prices of not only individual stocks but also index 

funds. But this is a long-term plan, and I think that it is very important that the TSP, our Board, and the agency continue a strong 

education program. That way the nearly 4 million participants can 

make their choices to allocate their funds depending on their age 

and the number of years they have left in the workforce. 

But because it is a long-term plan, I think they will—as they 

have benefited in the last 5 years from the uptick in the market— 

they have to make the proper allocations now in a market that is 

more turbulent. 

The good news, sir, is that, again, because it is long term, if they 

continue buying in the equity funds, they are buying those shares 

cheaper now so that when they do rise—because we know that 

things will turnaround eventually—they will be benefiting by buying those shares cheaper today than at the uptick—at the highest 

point a year or so ago when the market was doing extremely well. 

So I think the education, gentlemen, of our participants is vital 

in order for them to be successful because it is a long-term savings 

plan. 

Senator AKAKA. Thank you. Mr. Whiting. 

Mr. WHITING. Thank you, Mr. Chairman. As was previously said, 

I think it is very important for the participants to remember that 

this is a long-term plan and they need to maintain a long-term 

focus. It is also important that they continue to make regular contributions into the plan and that they do not try and chase the 

market or chase return. 

When Congress created the plan, it was designed to have index 

funds, and so the index funds do track the market. But a couple 

11 

of years ago, we added the life cycle funds, or the L Funds, as a 

way to help people make allocation decisions, based upon when 

they were going to need their money for retirement. I think that 

has been a great addition to the plan, and I think it is something 

that people who either do not have the time or the inclination to 

focus on the plan and on their investments really consider. These 

funds will make the allocations for them and make sure that everything continues to be done properly and that would be very helpful 

for them. 

Senator AKAKA. Thank you. 

Mr. Saul, the Board recently proposed a rule that would allow 

TSP participants only two inter-fund transfers per month with the 

flexibility to transfer money to the G Fund at any time. This 

change was made because of frequent inter-fund transfers by a 

small number of TSP participants into and out of the I Fund, costing the entire plan approximately $25 million. 

Was there any thought given to limiting inter-fund transfers only 

to the I Fund? 

Mr. SAUL. I think that in order to answer your question, you 

have to return to the basic principles of the plan, Mr. Chairman, 

and that is that this is a long-term savings plan, as we have said. 

This plan was not devised to in any way, shape, or form become 

a day-trading operation. It is something that really does not require and, as a matter of fact, we admonish against making a lot 

of changes in one’s retirement plan. 

The interesting thing is when we went to daily balancing about, 

I guess now, 4 years ago, 5 years ago, I had made a statement at 

that time, I was afraid exactly of this happening because what we 

have built is a system that is a fabulous system for somebody that 

wants to day trade. And, by the way, you can day trade at no expense to yourself, only to the plan. And that is not what this plan 

was about in the beginning. 

So what we had here was approximately 4,000 out of 4 million 

people began to use this thing as a day-trading account. And not 

only did it cost the other participants that weren’t involved in this 

a great deal of money, as you have stated, but it also made it very 

difficult to balance some of the index funds at the end of the day. 

You referred to the I Fund. The I Fund, because it is involved 

in smaller markets than the U.S. financial markets, and there is 

less liquidity in some of those markets, it became very difficult to 

balance the plan each day for Barclays Global Investors, who does 

our outside investing, to tie our plan into the index for the day because of this tremendous amount of money that was going in and 

out of the plan. 

So, we proposed these changes, but we proposed changes in a 

way that would not restrict anybody from being able to achieve liquidity in their account if there was turmoil in the markets, and 

that is why we allowed—we didn’t restrict in any way, shape, or 

form any transfers in the G Fund because we believed that the individual needed to be able to get liquidity if they so desired. 

We have just gone through the closing of a public comment period, which actually closed yesterday. The staff and the executive 

director, by order of the Board, will be reviewing the public comments, and within about 2 weeks, we will have a ruling from the 

12 

executive director and the staff as to where we are going to go with 

this thing. But I just caution everybody to remember that when 

Congress devised a great plan here, they made it a long-term savings plan. And because of all our technology changes that we put 

in in the last years, we have been able to build, unfortunately, a 

great mousetrap, and we built a system that is perfect for day trading. And I think that was not the intention of the plan when it was 

devised. So that was what brought this whole event before the 

Board. 

Senator AKAKA. Before I call on Senator Voinovich for his questions, let me ask this question of Mr. Whiting. TSP participants 

who understand the implications of their financial decisions will be 

more likely to take appropriate action to secure their retirement. 

While 91 percent of the Federal employees participate in the TSP, 

only 27 percent of the uniformed members participate in TSP. Increasing awareness of the benefits of the TSP and improving overall financial literacy of Federal employees could improve participation. What plans do you have to improve the financial literacy and 

participation among the uniformed services? 

Mr. WHITING. Thank you, Mr. Chairman. Increasing the percentage of participation amongst all the Federal employees and the uniformed services is one of the most important things that we hope 

to achieve. You are absolutely right. This is so important to their 

long-term financial security and their retirement that we focus on 

it monthly at every Board meeting. We track the percentage of all 

the agencies, which are participating, and we work with the Board 

staff to try and come up with ways to increase the participation. 

And financial education, as you have said, is one of the most important things that we can do in order to help that. And, in fact, to 

date, the agency staff has scheduled over 305 educational sessions, 

including 55 for agency and service representatives, and 250 employee briefings. 

So education and making people aware of the plan and how good 

it is, is one of the most important things that we can do, and we 

are working with everybody to ensure that. 

Mr. SANCHEZ. Mr. Chairman, can I add something to Mr. 

Whiting’s answer, sir? 

Senator AKAKA. Yes, Mr. Sanchez. 

Mr. SANCHEZ. Mr. Chairman and Senator Voinovich, I also want 

to add to the excellent answer Mr. Whiting gave, that the three of 

us, thanks to one of the Board’s professional staff members, Mr. 

Trabucco, who is sitting here behind us to the left, we had a meeting either late last year or earlier this year at the Pentagon with 

members from each of the units—Marine Corps, U.S. Air Force, 

and so on—as a Board—and I think that was the first time that 

had ever been done since the Board’s inception in 1986—to specifically talk about increasing the participation rate of the members 

of the uniformed services in the plan. 

It has nearly tripled since we have been on, but are we satisfied, 

sir? No, we are not. We want to continue to grow that, and that 

is why that meeting resulted at the Pentagon itself with those who 

are responsible in promoting the plan to the participants. 

Senator AKAKA. Thank you very much. Senator Voinovich. 

13 

Senator VOINOVICH. I think that you ought to be congratulated 

for keeping the cost of participation low. 

Mr. SAUL. Senator, when returns get smaller, as they have in the 

last years, obviously the percentage that one pays as overhead becomes very significant. Since we have been here, not only have we 

raised the amount of assets under management by two and a half 

times, but we have actually cut the actual dollars that are spent 

in order to run the plan. And I think by efficient management and 

use of technology, we have been able to actually drive down the 

real dollars, while at the same time more than doubling the asset 

value of the plan. 

I must say, though, that next year, over this year—and I am sure 

you know it because I know you and your staff follow what we do 

very closely—we have embarked on a plan to increase and modernize the technology efforts at the TSP, and that is going to entail 

some increase this year and next year. But it is for infrastructure 

development, which we feel is absolutely vital because of the large 

growth that the plan has encompassed. 

Why we want to keep the costs low, which we totally agree with 

and we are dedicated to that, we need to be sure that our infrastructure, staffing, and systems are able to cope with a plan that 

is growing as fast as it has. 

Senator VOINOVICH. I have had my own personal experience in 

transferring some deferred compensation out of the State of Ohio’s 

fund into the TSP. There was a period of time when the funds were 

in limbo. And I thought to myself, why did it take so much time 

for this to get transferred from the State of Ohio into the TSP? 

Mr. SAUL. We would blame it on the State of Ohio, of course. 

[Laughter.] 

Senator VOINOVICH. Why doesn’t the Board believe it would be 

advantageous to employees, and particularly those who do not contribute to the IRS-deferral limit, which is $15,500, not to be able 

to include the bonuses in their contributions? The base pay is what 

is used to calculate the contributions to the TSP and the bonuses 

are not. As more agencies move to pay for performance, it seems 

to me that someone ought to look at this, especially when these individuals have not maxed out their contributions. 

Mr. SAUL. We will definitely take a look at that, Senator. I know 

that we have encouraged everybody, though, to invest as much 

under the IRS regulations as possible for a 401(k) plan, which really governs the amount of investment. I assume you are also talking 

about the 6-percent government match on the bonuses. 

Senator VOINOVICH. I am talking about bonus compensation that 

is not part of the base. 

Mr. SAUL. That is a good point, and we will get back to you on 

this, and your staff. 

Senator VOINOVICH. The other thing is: How long has Barclay’s 

managed portions of the TSP? 

Mr. SAUL. Barclays actually has run this, I believe, since the inception of the plan. However, under the procurement laws, which 

we do every 3 to 5 years—I believe it is a 3-year rotation, we bid 

this management contract out. As a matter of fact, I believe it was 

last year or the year before, this contract was rebid, and Barclays 

was the successful bidder again. So they do not have a lock on it. 

14 

This is a competitive bid process and done under the Federal procurement laws. 

Senator VOINOVICH. And performance is one of the considerations? 

Mr. SAUL. There is a whole group of criteria that is set by 

the—— 

Senator VOINOVICH. How do you think they are doing? 

Mr. SAUL. I think actually Barclays is a very professional, very 

capable operation. 

Senator VOINOVICH. And they manage all the funds like your 

small—— 

Mr. SAUL. Yes, they do. 

Senator VOINOVICH. Large cap, small cap. 

Mr. SAUL. They do all of our funds currently. 

Senator VOINOVICH. They are the ones that select the companies 

that are within those classifications? 

Mr. SAUL. Well, the indexes are the index, and they set up a basket of stocks that pretty much mirrors the indexes, for example, 

the S&P 500, the Wilshire 4500, and the EFA Fund. 

Senator VOINOVICH. Do they have some discretion in terms of 

which funds are included? 

Mr. SAUL. No, they pretty much have to mirror the index funds, 

the way I understand it, in order to come out the same—with the 

same results as the index funds. Their baskets have to mirror pretty much the index funds as they are set up. But I assure you that 

Barclays, which I believe to be the largest now in the index fund 

operation, is a very highly professional operation. When we sent 

out the criteria, we actually had a consulting firm, Ennis Knupp 

and Associates, one of the biggest in the industry, come in and help 

us with the procurement that we sent out. So this was very professionally done, very competitively bid, and they were the successful 

bidders. 

Senator VOINOVICH. Pardon me for interrupting you, but it seems 

like all three of you like the L Fund which has been around for 2 

years? 

Mr. SAUL. Two years. It is now 15 percent of our assets. 

Senator VOINOVICH. Yes, and have you looked at the performance 

of that and do you feel that they are relatively competitive, understanding the market has not been the best in the last 6 or 7 

months? 

Mr. SAUL. I think if you look at the L Funds for the first quarter, 

which has been, as Mr. Sanchez said, a very turbulent quarter, I 

think you will find that, depending on which one you are in, I think 

it did just what it was intended to do. 

Obviously, those with the longest retirement did lose more, the 

L Funds did perform less in the market than the shorter ones because the shorter ones had more bond, more G Fund in them. But 

that is the way it is set up to operate. And I think that for somebody that is not a sophisticated investor, it is a great way to go. 

I think it is one of the best additions we had in the plan. And I 

think that as we go on the next couple years, you are going to see 

probably the vast majority of the funds that are run by the TSP 

in the L Funds. I think the popularity will increase as people become more educated about them. 

15 

Senator VOINOVICH. Thank you. 

Mr. WHITING. Mr. Senator, I would just like to say that we make 

it very clear that the existing companies that we have engaged for 

the various positions, for the various parts of the TSP, in absolutely no way have a lock on the business going forward. Competitive bidding is extremely important to us and to the agency because that benefit gets passed directly onto the participants. So it 

is extremely important to us that they do that. Everybody understands that, and always works very hard to sharpen their pencils 

when it comes time to the bidding process. The real beneficiaries 

are the participants, so we really do focus on that. 

Senator VOINOVICH. Thank you very much. 

Senator AKAKA. Thank you very much, Senator Voinovich. 

As I had mentioned earlier, we called this hearing to get to speak 

with you and to hear your thoughts about TSP. Also, I want to 

commend you for what you have done since you have been on 

board, if I recall, since November 15, 2002. And since then—and 

you would agree with me—there has been huge improvement in 

the program, so I commend you for that. And we always look forward to improving whatever we are doing, and I think you know 

that Congress is looking at you to evaluate and improve existing 

TSP education programs. I look forward to your continuing to do 

that. Of course, that falls under financial literacy, which is so important, and it is something that we need to do throughout our 

Federal system, especially for those who have to make financial decisions at different times in their lives. And so these are important 

in what you need to do, and in this hearing, we were looking at 

hearing about some of the things that you are doing, and one of 

them was the transfer of funds between funds. 

I also wanted to mention that through financial literacy, I have 

started a program that now has gone on for 3 years in Hawaii. And 

first I started with NASD, and I do not know whether that means 

anything to you, but it is the National Association of Securities 

Dealers, who had a great program of hosting workshops with people. I had them come to Hawaii for 3 years, and they were a sensation. I took them to every island, and they held these workshops, 

and all of these were successful. People were so upbeat about investing. And then it was changed from NASD to FINRA, which is 

now Financial Industry Regulatory Authority, and I had them last 

year come out as FINRA to conduct three workshops in Hawaii. 

I just mentioned that because one of the hearings was only for 

military personnel. The admirals and the generals were so happy, 

they praised me for that hearing, and they said it was so good for 

their people to sit—and we have a huge convention hall in Hawaii, 

and that place was packed with couples from the military. All of 

them, as they left, they were so happy, they learned so much in 

that hearing and were so upbeat that I thought some things are 

going to be improved. But the top officers felt that it really worked 

out well. 

I just wanted to mention that to you as something—and these 

were educational programs, and it has really taken in Hawaii. I do 

not know whether they will come back another year, but we will 

see. Financial literacy is so important to our country, and I am 

16 

glad you folks have that on your agenda and continue to work at 

that. 

Seeing that there are no further questions at this time, I want 

to congratulate you as nominees again, and thank you for what you 

have done already. I wish you well in your future. I know you are 

anxious for your nominations to move forward, and I just want to 

tell you that I will try my best to move your nominations in the 

near future and have the Senate expeditiously move on that. 

With that, the hearing record will remain open until the close of 

business tomorrow for Members of this Committee to submit additional statements or questions. And, again, I want to thank you for 

being here and for your patience. 

Mr. SAUL. Thank you, Mr. Chairman. 

Mr. SANCHEZ. Thank you, Mr. Chairman. 

Mr. WHITING. Thank you. 

Senator AKAKA. This hearing is adjourned. 

[Whereupon, at 4:28 p.m., the Committee was adjourned.] 

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