FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

MINUTES OF THE MEETING OF THE BOARD MEMBERS

April 25, 2023

Michael F. Gerber, Chair of the Federal Retirement Thrift Investment Board, 

convened a meeting of the Board members on April 25, 2023, at 10:00 a.m., Eastern 

Daylight Time. The meeting was held at the Board’s offices at 77 K Street, NE and was 

open to the public via teleconference. In attendance were Dana K. Bilyeu of Oregon, 

member; Leona M. Bridges of California, member; Stacie Olivares of California, 

member; Ravindra Deo, Executive Director; Dharmesh Vashee, General Counsel and 

Secretary; Suzanne Tosini, Chief Operating Officer and Deputy Executive Director; 

Kimberly A. Weaver, Director, Office of External Affairs (by telephone); Susan Crowder, 

Chief Financial Officer; Gisile Goethe, Director, Office of Resource Management; James 

Courtney, Director, Office of Participant Experience; Sean McCaffrey, Chief Investment 

Officer; Vijay Desai, Chief Information Officer; and Thomas Brandt, Chief Risk Officer.

Welcome and Introductions. 

Chair Gerber called to order the monthly meeting of the Federal 

Retirement Thrift Investment Board (FRTIB or Agency) at 10:00 a.m. and welcomed 

everyone present to the meeting.

1. Approval of the Minutes of the March 28, 2023, Board Meeting. 

Chair Gerber entertained a motion for approval of the minutes of the 

March 28, 2023, Board meeting. The following motion was made, seconded, and 

adopted without objection:

MOTION: That the minutes of the Board meeting held on March 28, 2023, 

be approved.

Mr. Deo then gave opening remarks and provided a summary of the agenda.

2. Monthly Reports. 

a. Participant Activity Report

Mr. Courtney presented the monthly Participant Activity Report. See “Thrift 

Savings Fund Statistics March 2023” (attached). He reported that the Federal 

Employees Retirement System (FERS) participation rate reached 95.4 percent and 

more than 86 percent of FERS participants are receiving the full contribution match, 

both new Plan records. Additionally, more than 83 percent of Blended Retirement 

System (BRS) active-duty participants are receiving the full contribution match, tying a 

Plan record.
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In response to a question from Member Bilyeu, Mr. Courtney noted the 

number of FERS participants receiving the full employer match is higher than in private 

sector plans.

b. Legislative Report

Ms. Weaver reported that the House of Representatives and the Senate 

were in recess the past two weeks. This week they are back in session and Speaker 

Kevin McCarthy has a bill addressing the debt ceiling, but nothing in the bill affects the 

TSP.

3. Quarterly Reports. 

a. Budget Review

Ms. Crowder provided the quarterly budget update. See “FY2023 2nd 

Quarter Budget Review” (attached). The Agency budget for fiscal year (FY) 2023 is

481.4 million dollars. Second-quarter spending shows the Agency is in alignment with

its budget projections by allocating 96 percent of the budget, or 368.6 million dollars, 

relative to the second quarter spend plan of 385.9 million dollars. The Agency executed 

77 percent of the total FY 2023 budget through the second quarter, 81 percent of which 

it spent to support recordkeeping operations and communications as well as the 

continuing decommissioning of legacy systems.

Ms. Crowder reported that at the end of the second quarter, average 

assets under management increased to 753 billion dollars. Ms. Crowder also reported 

that the administrative expense ratios, calculated by calendar year (CY), ended CY 

2022 with a gross administrative expense ratio of 6.8 basis points and a net 

administrative expense ratio of 5.8 basis points.

In response to a question from Chair Gerber, Ms. Crowder noted that the 

expense ratios are much lower compared to the private sector with projections that 

expense ratios will continue to decrease over time.

In response to a question from Member Bilyeu, Ms. Crowder provided that 

forfeitures should remain a factor and have been static over the last few years.

b. Audit Status

Ms. Crowder reviewed the quarterly external audit and remediation status. 

See “Quarterly External Audit - Remediation Status April 2023” (attached). Ms. Crowder 

reported that at the end of the second quarter for FY 2023, 12 of the 13 planned 

external audits were in progress.

Ms. Crowder explained that the 13 external audits include nine audits by 

the Department of Labor’s Employee Benefits Security Administration (EBSA), one audit
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by the Government Accountability Office (GAO), two by CliftonLarsonAllen LLP (CLA), 

and one by Williams Adley.

Regarding remediation efforts, Ms. Crowder reported that the target for FY 

2023 is to close 29 open recommendations. During the second quarter, the Agency 

closed one audit recommendation and received two additional closure packages at the 

end of the quarter that will be reflected in the third quarter review.

Ms. Crowder further provided that one audit performed by EBSA looks at 

prior open audit findings with the goal of giving the Board and EBSA a baseline for 

actual open and closed audits with the expectation of a significant drop in open audit 

findings. In response to a question from Member Bilyeu, Ms. Crowder noted this audit 

will evaluate the Agency’s decommissioning efforts for the legacy system and transition 

to our new operating model to determine accurate audit closure findings.

c. Investment Report

Mr. McCaffrey reviewed the monthly investment performance report. See

“March 2023 Investment Program Review” (attached). For the month of March, 

BlackRock’s performance for the F, C, and S Funds was in line with the Funds’ 

respective indices. BlackRock’s performance for the I Fund exceeded the International 

Index by 69 basis points primarily due to fair value pricing. State Street’s performance 

for the F, C, and S Funds in March was in line with the Funds’ respective indices. State 

Street’s performance for the I Fund exceeded the International Index by 38 basis points 

primarily due to fair value pricing.

During March, multiple failures among regional banks fueled market 

volatility and prompted both concerns about contagion and questions about future 

Federal Reserve actions. Although the Federal Reserve ultimately raised its target 

interest rate range, it noted that recent developments in the banking system could weigh 

on inflation. The C Fund rose, but the S Fund fell. The I Fund ended with a gain,

helped in part by a weaker U.S. dollar. And lower interest rates helped the F Fund

finish higher. All the L Funds posted gains.

Mr. McCaffrey also reported that BlackRock’s year-to-date performance 

for the F Fund was ahead of the benchmark by 19 basis points primarily due to a 

difference between end-of-year pricing for the benchmark and the Fund. C Fund 

performance was flat to the benchmark. S Fund performance was ahead of the index by 

seven basis points, primarily due to securities lending. The I Fund’s performance 

exceeded the benchmark by 12 basis points, primarily due to tax advantage.

Mr. McCaffrey reported that State Street’s year-to-date performance for 

the F Fund was ahead of the Fixed Income Index by 19 basis points because of the 

end-of-year pricing difference. Both the C and S Fund performance were in line with the 

respective indices. The I Fund performance exceeded the International Index by 42 

basis points, primarily due to fair value pricing.
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Mr. McCaffrey reported that investment performance is mixed so far in 

April. Through Monday, April 27, the C Fund is ahead 0.75 percent. The S Fund is down

1.39 percent. The I Fund has gained 3.19 percent. The F Fund is ahead by 0.18 

percent. The G Fund has earned 0.24 percent.

Mr. McCaffrey shared that L Fund participation continued to grow in March 

by approximately 20,000 participants. This development was attributable to the L2055, 

L2060, and L2065 Funds, reflecting the impact of automatic enrollment of new 

participants.

Interfund transfers remained at a relatively low level. Approximately 1.5 

percent of participants moved money in March, below the historical median of two 

percent. Mr. McCaffrey further provided that year-to-date through March 31, 

approximately 3.9 percent of participants have moved money between funds, which 

means 96.1 percent did not move anything.

Regarding the quarterly updates, Mr. McCaffrey began with proxy voting.

An Institutional Shareholder Services (ISS) audit of BlackRock’s proxy found no 

exceptions to its established guidelines during the fourth quarter of 2022. Likewise, an 

ISS audit of State Street’s proxy voting found no exceptions to the firm’s established 

guidelines for that same period.

Mr. McCaffrey next discussed class action settlements for the fourth 

quarter of 2022. For BlackRock, the quarter began with 93 open claims. During the 

quarter, 30 new claims were opened with eight in the C Fund and 22 in the S Fund. 

Seven claims were settled for a total of 8,090,740 dollars. Two of the claims settled 

were in the C Fund for a total of 108,614 dollars. Five claims in the S Fund were settled 

for a total of 7,982,126 dollars. Four claims in the C Fund and two in the S Fund were 

closed due to administrator action, bringing the total number of claims closed during the 

quarter to 13. Additionally, residual payments from two previously closed claims in the C 

Fund and three previously closed claims in the S Fund yielded a total of 39,388 dollars 

and 15,151 dollars, respectively. The total settlement proceeds for the quarter were 

8,145,278 dollars, and 110 claims remained open at the end of the quarter.

For State Street, four claims were open in the S Fund at the start of the 

quarter. Five additional claims were opened in the S Fund and one claim in the S Fund 

was settled for a total of 52,970 dollars. Thus, eight claims remain open at the end of 

the quarter.

4. Office of Investments Annual Report. 

Mr. McCaffrey presented the annual review of the Office of Investments 

(OI). See “Office of Investments Annual Review” (attached). Mr. McCaffrey stated the 

function of OI is to develop and implement investment policy and provide subject matter 

expertise for TSP investment programs. The OI organizational structure includes six 

team members who leverage strong partnerships with other Agency program offices.
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Mr. McCaffrey provided an overview of six key activities for OI: (1) develop 

investment policies and procedures; (2) review L Fund asset allocation strategies; (3) 

oversee investment management services, including securities lending; (4) ensure 

funds are invested in accordance with law and applicable policies; and (5) provide 

subject matter expertise to the Agency and to the Board and (6) assistance to other 

Offices whenever needed. Mr. McCaffrey then provided a summary of TSP investment 

history, which discussed results of these key activities.

Mr. McCaffrey then discussed OI’s accomplishments over the last three 

years. OI has developed and implemented a long-term transition plan to improve upon 

the age-appropriate asset allocations for the L Funds, in addition to creating new fiveyear interval L Funds to better meet participants’ needs. OI awarded new asset 

manager contracts in 2020 and successfully transferred a portion of the assets from 

BlackRock to State Street.

OI’s work with the asset managers on the securities lending program has 

added value on top of the performance of well-managed index strategies. Five new 

investment consultant contracts have proven valuable to OI’s work, including last year’s 

studies of investment options and best practices for Board review of investment policy. 

OI has also automated much of its regular performance monitoring. OI supports regular 

audits of TSP’s external investment managers for compliance with their own policies 

and procedures, as well as laws and regulations, and to ensure they have proper 

controls in place.

In response to a question from Member Bridges, Mr. McCaffrey 

acknowledged that five investment consultants are sufficient to support OI’s needs in 

the next five to ten years. Mr. Deo noted the increase from two investment consultants 

to five for this purpose.

Next, Mr. McCaffrey provided more detail on OI’s L Funds work. He noted 

that each L Fund follows a strategic plan called a glidepath that reduces risk over time 

toward a terminal point where the asset allocations are intended to be permanently set, 

with a noted transition exception. Over the last few years, OI was driven to transform

the L Funds by several factors including: (1) ten-year increments were not granular 

enough to meet participant needs and not in line with industry standards; (2) BRS would 

every year bring on many thousands of new recruits who would be only at the beginning 

of their retirement savings programs; (3) recent data showed that median withdrawal of 

funds by participants starts at age 63 instead of age 62; and (4) due to increased 

recognition that retirement assets need to cover a very significant period of years after 

the retirement date.

To account for these factors, OI has implemented the following changes.

They shifted the terminal point of the glidepath to age 63 from age 62 and initiated a 

ten-year transition of stock allocations in the L Income Fund from 20 percent to 30 

percent. The Agency accounted for new participants as young as 17 years old by
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creating a target of 99 percent equity for the new glidepath, and by creating a L 2065 

fund in addition to the L 2060 Fund and L 2055 Fund. Mr. McCaffrey noted the Agency 

created a transition schedule for the new asset allocation baseline to minimize 

disruption for current participants in L Funds, to ensure proper time for communications, 

and to reduce possibilities for mistiming the planned increase in stock allocations.

Independent of this work, the Agency changed the default TSP 

contribution from three to five percent. Overall, these changes have put participants in a 

better position to generate favorable financial outcomes at retirement. Mr. McCaffrey 

noted that over half of all accounts have some assets in the L Funds, and over one-third 

of participants have 100 percent of their assets in the L Funds.

Mr. McCaffrey next highlighted OI’s success in fulfilling the Board’s 

mandate to mitigate organizational concentration risk by moving from one asset 

manager to two in 2020. He also explained that the five investment consultants 

supporting OI are part of blanket purchase agreements and only paid for work on 

projects they are selected to perform. Mr. McCaffrey provided examples of both 

recurring and ad hoc work the investment consultants perform for OI.

Mr. McCaffrey shared that in the near term, OI will focus on quality and 

continuous improvement including investment management supervision, building upon 

prior automation work, contingency planning, and fulfilling OI’s role as the Agency’s 

trusted source for investment knowledge. In 2025, OI plans to retire the L2025 Fund 

and implement the L2070 Fund. Additionally, they have established a policy to review 

the L Fund glidepath at least once every three years and plan to study the current 

benchmark indices for the F, C, S, and I Funds this year. Mr. McCaffrey noted that all of 

this is possible because of the experience and dedication of the OI staff.

In response to questions from Chair Gerber and Member Bridges, Mr.

McCaffrey confirmed that OI has sufficient resources to handle its responsibilities and 

clarified that those responsibilities do not include the Mutual Fund Window (MFW), 

which is not managed by the Agency. Mr. Deo and Mr. Vashee explained that the MFW 

falls under the recordkeeper contract and intends to provide a broad set of investment 

options. For the small subset of participants who make that choice, the MFW serves as 

a conduit to investments under the responsibility of other firms and boards. The Agency 

does not select or screen the funds in the MFW. The funds selected by participants in 

the MFW provide disclosures, and participants perform their own research and 

determine what funds to buy with a wide variety of strategies, goals, objectives, and 

managers afforded to them.

5. Enterprise Risk Management Update. 

Mr. Brandt provided an update on Enterprise Risk Management (ERM).

See “Enterprise Risk Management Update” (attached). After describing the annual 

ERM program cycle, Mr. Brandt provided a close-out for the CY 2022 risk treatment 

plans. The Agency completed the insider threat management risk treatment plan
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actions, and the risk score dropped from medium-high to medium. For cyber security, 

the Agency accomplished the risk treatment plan actions, but the risk score remains at 

medium-high due to the continually evolving cyber threat landscape. The Agency also 

accomplished the risk treatment plan actions for supply chain risk management; the risk 

remains medium-high due to the continued build out of supply chain risk management 

and increased reliance on vendors. The Agency accomplished the risk treatment plan 

actions for human capital management, dropping the risk score from medium-high to 

medium-low. For TSP fraud, the risk treatment plan required reevaluation due to 

continued changes to the Agency’s operating model in CY 2022, and the updated 

version is included in the CY 2023 enterprise risk profile. For both procurement and 

contract management, the Agency accomplished the CY 2022 risk treatment plan 

actions, but both risk scores remain medium-high.

Next, Mr. Brandt provided an overview of the CY 2023 enterprise risks.

ERM’s risk profile for CY 2023 is composed of 12 risks, 11 of which are continuing from 

CY 2022. The Agency added one new risk: reputational risk of TSP operations and 

customer experience. Of the twelve enterprise risks, five are rated medium-high, five 

are rated medium, and two are rated medium-low. Mr. Brandt will report to the Board on 

all risks rated medium-high or higher.

In response to questions from Chair Gerber, Mr. Brandt confirmed these 

ratings, historically, fluctuate over time. Additionally, Mr. Brandt explained that the 

Agency looks at supply chain risk broadly, including the specific vendor, the supply 

chain, and the third parties with whom the Agency interacts. In response to a question 

from Member Bilyeu regarding the decision to score the new risk as medium-high, Mr. 

Brandt committed to providing the Board with that risk treatment plan as it is developed.

6. Adjourn.

On a vote taken by the Chair, the members closed the meeting at 10:58

a.m. to enter into executive session.

At 1:07 p.m., upon completion of the executive session, the members 

reconvened the open portion of the meeting.

Whereupon there being no further business, the following motion was 

made, seconded, and adopted without objection and Chair Gerber adjourned the 

meeting at 1:07 p.m.

MOTION: That this meeting be adjourned.

Dharmesh Vashee

General Counsel and Secretary

Attachments
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1. Thrift Savings Fund Statistics March 2023

2. FY2023 2nd Quarter Budget Review

3. Quarterly External Audit - Remediation Status March 2023

4. March 2023 Investment Program Review

5. Office of Investments Annual Review

6. Enterprise Risk Management Update