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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

MINUTES OF THE MEETING OF THE BOARD MEMBERS

January 24, 2022

David A. Jones, Acting Chairperson of the Federal Retirement Thrift Investment

Board, convened a meeting of the Board members on January 24, 2022, at 10:00 a.m.,

Eastern Standard Time. The meeting was held telephonically and open to the public. In

attendance were Dana K. Bilyeu of Oregon, member; Ronald D. McCray of Texas,

member; William S. Jasien of South Carolina, 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; Susan Crowder, Chief Financial Officer; Gisile Goethe, Director,

Office of Resource Management; James Courtney, Director, Office of Communications

and Education; Tee Ramos, Director, Office of Participant Services; Sean McCaffrey,

Chief Investment Officer; Vijay Desai, Chief Technology Officer; Thomas Brandt, Chief

Risk Officer; and Ernest Witherspoon, Executive Advisor to the Executive Director.

Welcome and Introductions. 

Acting Chairperson Jones 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 December 17, 2021 Board Meeting.

Acting Chairperson Jones entertained a motion for approval of the minutes

of the December 17, 2021 Board meeting. The following motion was made, seconded,

and adopted without objection:

MOTION: That the minutes of the Board meeting held on December 17,

2021 be approved.

2. Monthly Reports.

Mr. Deo gave opening remarks, welcomed the Agency’s new Chief Risk

Officer, Thomas Brandt, and provided a brief summary of the agenda for the meeting.

a. Participant Activity Report

Mr. Ramos reviewed the monthly Participant Activity Report. See “Thrift

Savings Fund Statistics December 2021” (attached). Mr. Ramos highlighted that the

number of participants who received residual required minimum distribution (RMD)

payments increased in December 2021 when compared to 2019, as did the total dollar

amounts of those payments. The number of residual payments increased from 30,528
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in 2019 to 51,201 in 2021, an increase of approximately 68 percent with resulting

payments increasing from 144,633,796 dollars in 2019 to 356,985,771 dollars in 2021.

He went on to note that national labor supply and COVID-related absences have

affected the contact center’s ability to recruit, hire, and retain staff, which has had an

impact on phone service level rate (SLR). FRTIB is working with vendors to address

these challenges.

In response to a question from Member Jasien, Mr. Ramos shared that

call abandonment rates are at one percent, with eMessaging response at 100 percent,

written correspondence response at 97 percent and phone response at 86 percent,

noting that TSP maintains high SLR standards that are more aggressive than industry

standard.

b. Legislative Report

Ms. Weaver began by noting that there was no TSP nor FRTIB-related

legislation introduced in January 2022. She went on to briefly discuss the

appropriations bills set to expire on February 18, 2022, with Congress working on an

extension of funding through the end of the fiscal year upon their return from recess

next week.

3. Quarterly Reports.

c. Investment Policy

Mr. McCaffrey reviewed the monthly investment performance report. See

"December 2021 Performance Review” (attached).

In December 2021, BlackRock’s performance for the F Fund trailed the

Fixed Income Index returns by seven basis points, primarily due to differences in the

timing of pricing by the index provider and by BlackRock on the final trading day of

December. The underperformance attributable to the price differential reversed on the

first trading day of January. Its performance for the C Fund was in line with the Large

Cap Index. For the S Fund, it outperformed the Small Mid Cap Index by four basis

points, primarily resulting from futures mis-tracking. Its performance for the I Fund was

in line with the International Index.

State Street’s December 2021 performance for the F Fund was in line with

the Fixed Income Index for the month. Its performance was also impacted by

differences in the timing of the index pricing and the portfolio pricing. In this case, other

factors offset most of the underperformance in its December results. Just as with

BlackRock, on January’s first trading day, there was some reversal of the pricing

difference. State Street’s performance for the C Fund was in line with the Large Cap

Index. For the S Fund, it outperformed the Small Mid Cap Index by three basis points,

primarily due to futures mis-tracking.
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Equity markets rallied in December despite both employment growth

coming in below estimates and a new coronavirus variant that fueled a surge in cases.

The C, S, and I Funds rose, completing a very strong year for equities overall,

especially for the C Fund. The Federal Reserve left its target short-term interest rate

range unchanged at 0 - 25 basis points, but did acknowledge inflationary pressures,

signaling its intent to scale back monetary stimulus in the coming months. Long-term

interest rates, however, edged higher in December, contributing to a monthly loss for

the F Fund. All the L Funds posted gains in December.

When reviewing BlackRock’s full year performance, Mr. McCaffrey noted

that for the F Fund, BlackRock’s performance was 12 basis points better than the Fixed

Income Index returns, primarily resulting from securities lending. Its performance for the

C Fund was in line with the Large Cap Index returns. For the S Fund, its performance

exceeded the Small Mid Cap Index by 14 basis points, primarily due to securities

lending. Its performance for the I Fund was ahead of the International Index by 24 basis

points, primarily due to tax advantage. Mr. McCaffrey provided a reminder that

beginning later this year, he will report year-to-date performance for both investment

managers because calendar year 2022 will be State Street’s first full year as an asset

manager for the TSP.

For the current month through Friday, January 21, both equities and fixed

income prices have gone lower. In equities, the C Fund is down 7.66 percent, and the

S Fund has a loss of 12.51 percent. In international markets, the I Fund also has lost

2.99 percent. In fixed income, the F Fund has a loss of 1.70 percent. The G Fund is

ahead by 0.09 percent.

During December, participation in the L Funds increased by about 32,000

individuals, driven largely by automatic enrollment of new participants. The growth of

participation in the L Funds over the month and over the past year has been well within

expectations.

Mr. McCaffrey next discussed interfund transfers (IFT), noting that in

December, about two percent of Plan participants chose to do an IFT. This is in

keeping with the theme that the vast majority of participants do not execute an IFT in a

given month.

Moving on to the quarterly proxy voting and class action settlements

report, Mr. McCaffrey explained that it covered the third quarter of calendar year 2021

for both BlackRock and State Street. Audits of BlackRock and State Street’s proxy

voting conducted by ISS found no exceptions to either asset manager’s established

guidelines. 

For BlackRock, the third quarter began with 67 open claims in class action settlements.

Five claims were opened in the C Fund and 13 claims were opened in the S Fund.

Overall, 12 claims were settled for a total of 1,057,433 dollars. Three claims were

settled in the C Fund for 530,284 dollars and eight claims were settled in the S Fund for
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a total of 522,496 dollars. One claim was settled in the I Fund for 4,432 dollars.

Residual payments from two closed S Fund claims yielded an additional 221 dollars.

Because of administrator action, one claim was closed in the C Fund and four claims

were closed in the S Fund, bringing total closed claims to 17. Sixty-eight claims

remained open across the four Funds at the end of the quarter.

For State Street, there was no securities litigation activity reported for the

quarter.

Acting Chairperson Jones entertained a motion to continue the current

policies for the G, F, C, S, and I Funds. The following motion was made, seconded, and

adopted without objection:

MOTION: That the current investment policies for the G, F, C, S, and I

Funds are affirmed without change.

d. Audit Status

Mr. Deo and Ms. Crowder reviewed the audit and security remediation

status. See “Audit – Remediation Status January 2022” (attached). Ms. Crowder

began by reviewing recent trends in the Agency’s external audits, noting a high of 20

external audits in fiscal year 2019 and a low of seven in fiscal year 2020. There are

nine external audits in fiscal year 2022. As of the end of the first quarter, two have been

completed, four are in progress, and three have not yet started.

Mr. Deo began his review of Agency remediation efforts by noting the

Agency reorganization that resulting from the merger of the Office of Enterprise Risk

Management with the Office of Enterprise Planning to form the new Office of Planning

and Risk, and placement of the audit group in the Office of the Chief Financial Officer.

He reported that the Agency met its audit closure goal of 29 for fiscal year 2022 by

completing 30 closures in the first quarter. While 90 audit recommendations across

fiscal years 2013 to 2021 remain open, Mr. Deo noted that the Agency focus is to

prioritize closing audits based on risk ranking as opposed to age.

e. Budget Review

Ms. Crowder provided the quarterly budget update. See “FY 2022 1st

Quarter Budget Review” (attached). The Agency budget for FY 2022 is 496.8 million

dollars. First quarter spending analysis shows the Agency is behind in budget

projections by allocating 78 percent of the budget relative to the Q1 spend plan. First

quarter execution was 45 percent of the total budget, the bulk of which was spent in

support of current, and the transition to future, recordkeeping operations.

4. Annual Expense Ratio.
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Ms. Crowder presented the annual review of TSP administrative expenses

for 2021. See “2021 TSP Annual Expenses” (attached). Ms. Crowder began by

highlighting the December 31, 2021 TSP plan balance of 812 billion dollars. Ms.

Crowder noted that Administrative expenses are spread across the calendar year. The

2021 average net assets for the plan were 763 billion dollars, a 21 percent increase

from the previous year. Administrative expenses for 2021 increased by 30 million

dollars to 401 million dollars, in line with budget projections. Total forfeitures and loan

fees collected in 2021 offset the Agency’s gross administrative expenses by 74 million

dollars resulting in an overall increase in net administrative expenses of 19 million

dollars, or 327 million dollars in total net administrative expenses. The TSP, thanks to

both prudent expenditures and increasing assets, had a net expense ratio of 4.3 basis

points for 2021. TSP ended 2021 with a positive net cash flow of 8 billion dollars.

In response to a question from Member Jasien on the expense ratio

forecast for 2022, Ms. Crowder noted that the gross expense ratio forecast is 6.2 basis

points.

5. Financial Systems Modernization (FSM) Update.

Ms. Crowder and Ms. Khatrina Higgs, Financial Systems Modernization

Program Manager, provided an update on the financial systems modernization effort.

See “Financial Systems Modernization (FSM) Update” (attached). On January 14,

2022, the Agency launched its new integrated financial, acquisition, and travel systems.

This modernization effort was a 15-month digital transformation away from the Agency’s

custom legacy IT systems to the use of modern, commercial-off-the-shelf (COTS)

solutions. The new financial systems are hosted via shared service provider, the

Department of the Interior’s Interior Business Center (IBC). The new system consists of

Oracle Federal Financial for budget and accounting, PRISM for acquisitions, and E2 for

automated travel booking and reimbursements. These new solutions automate

processes, which reduce errors and delays and provide data transparency.

6. Converge Update.

Mr. Tanner Nohe, Converge Program Manager, provided an update on

Converge. See “Converge Update for January 2022” (attached). Mr. Nohe began by

noting that while data testing continues, the most recent iteration is the first time

Accenture Federal Services (AFS) is testing with live, non-anonymized data. This

comes as a result of the conditional authorization to operate (ATO) issued in December

2021. This round of testing will continue through February 2022. Payroll office

readiness efforts are on track, with 20 percent of interconnection security agreements

completed and the remaining in progress. Other preparations for launch continue, such

as verifying and credentialing authorized users at other federal agencies and finalizing

portal training for agencies, which is how agencies will submit employee contribution

data in the future.
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7. Adjourn.

Whereupon there being no further business, the following motion was

made, seconded, and adopted without objection and Acting Chairperson Jones

adjourned the meeting at 10:52 a.m.

MOTION: That this meeting be adjourned.

Dharmesh Vashee

General Counsel and Secretary

Attachments

1. Thrift Savings Fund Statistics December 2021

2. December 2021 Performance Review

3. Audit – Remediation Status January 2022

4. FY 2022 1st Quarter Budget Review

5. 2021 TSP Annual Expenses

6. Financial Systems Modernization (FSM) Update

7. Converge Update for January 2022