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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

June 2007: 

Federal Retirement Thrift Investment Board: 

Many Responsibilities and Investment Policies Set by Congress: 

GAO-07-611: 

GAO Highlights: 

Highlights of GAO-07-611, a report to congressional requesters 

Why GAO Did This Study: 

The Thrift Savings Plan (TSP), a retirement savings and investment plan 
for federal workers, held approximately $210 billion in retirement 
assets for 3.7 million participants, as of February 2007. TSP is 
managed by the Federal Retirement Thrift Investment Board (FRTIB). In 
light of questions about TSP oversight, we examined (1) the current 
structure for overseeing FRTIB, (2) how the statutorily defined 
fiduciary responsibilities of FRTIB compare to the responsibilities of 
private plan sponsors and how FRTIB fulfills its responsibilities, (3) 
how FRTIB’s investment policies differ from those of private plan 
sponsors, and (4) FRTIB’s statutory responsibilities to educate plan 
participants about TSP and other retirement issues and how these 
responsibilities compare with those of private and state and local 
government employee plan sponsors. 

What GAO Found: 

The Department of Labor (DOL) and Congress oversee FRTIB. In accordance 
with the law establishing TSP, DOL conducts regular audits to determine 
the level of compliance with laws and regulations as well as to ensure 
the efficiency and effectiveness of operations. Congress requires FRTIB 
to submit its annual budget and other reports, and to undergo an 
independent financial audit. However, Congress has not held regular 
FRTIB oversight hearings. Also, DOL does not submit its audit reports 
directly to Congress, and has not yet been provided with a mechanism to 
communicate issues of critical concern to Congress. 

FRTIB’s fiduciary duties are similar to those of fiduciaries of private 
sector plans. To act prudently and solely in the interest of plan 
participants, FRTIB has implemented policies and practices in several 
of the areas mentioned in DOL’s guidance for private sector plans. 
However, unlike the law governing private plans, the Federal Employees’ 
Retirement System Act of 1986 (FERSA)—the law that governs the 
administration of TSP—contains special liability protections for Board 
members and the Executive Director. 

FRTIB has less discretion than private sector plan sponsors in setting 
investment policy because the investment options available to TSP 
participants are largely outlined in law, whereas private sector plan 
sponsors are responsible for choosing which investment options to offer 
participants. TSP’s authorizing statute specifies the number and types 
of funds available to participants, and requires that some of these 
funds track indexes, which are broad, diversified market indicators. 
FRTIB chooses the particular indexes for the funds to track, reviews 
the investment options, and suggests additional funds. Changing TSP 
investment options requires legislation. 

FRTIB and the Office of Personnel Management (OPM) are responsible for 
educating participants about TSP and general retirement issues, while 
the private and state and local government employee plan sponsors that 
we interviewed are governed by different rules. By statute, FRTIB is 
charged with developing educational materials for participants about 
TSP-specific issues. FRTIB also assists OPM, which is required to 
provide general retirement education to federal employees and train 
retirement counselors at federal agencies to provide information to 
federal employees. Private plan sponsors as well as the state and local 
government employee plan sponsors that we spoke with are responsible 
for educating participants about their plans, but often supply general 
retirement information as well. 

As the size and complexity of TSP have grown, an appropriate level of 
oversight of FRTIB is critical to ensuring that federal workers’ 
retirement savings are properly managed. GAO previously recommended 
that Congress consider amending FERSA to require DOL to establish a 
formal process by which the Secretary of Labor can report to Congress 
issues of critical concern about actions of the Executive Director and 
Board members. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-611]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Barbara Bovbjerg at (202) 
512-7215 or bovbjergb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

DOL and Congress Oversee FRTIB, but Oversight Has Not Included Regular 
Hearings: 

TSP's Fiduciaries Have Similar Duties to Those of Private Plan 
Fiduciaries, but TSP Board Members and the Executive Director Have 
Special Liability Protections: 

TSP Fiduciaries Have Limited Discretion over Investment Policy Compared 
to Fiduciaries of Private Plans: 

FRTIB and Other Federal Agencies Have Responsibility for Educating 
Participants on Retirement Issues, and Responsibilities Vary for 
Private and State and Local Government Employee Plans: 

Conclusion: 

Agency Comments and Our Evaluation: 

Appendix I: Selection of the Plan Sponsor Comparison Group: 

Appendix II: Comments from the Federal Retirement Thrift Investment 
Board: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: FERSA and FRTIB Investment Policies for Each TSP Fund: 

Abbreviations: 

DOL: Department of Labor: 

EBSA: Employee Benefits Security Administration: 

ERISA: Employee Retirement Income Security Act of 1974: 

FERS: Federal Employees' Retirement System: 

FERSA: Federal Employees' Retirement System Act of 1986: 

FRTIB: Federal Retirement Thrift Investment Board: 

FTCA: Federal Tort Claims Act: 

OPM: Office of Personnel Management: 

PSCA: Profit Sharing/401(k) Council of America: 

TSP: Thrift Savings Plan: 

United States Government Accountability Office: 
Washington, DC 20548: 

June 21, 2007: 

The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Tom Davis: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

As of February 2007, the Thrift Savings Plan (TSP), a retirement 
savings and investment plan for federal workers, held approximately 
$210 billion in retirement assets for 3.7 million current and former 
federal employees. Similar to private sector 401(k) plans, TSP allows 
employees to save for retirement by diverting a portion of their pretax 
income into investment accounts that can grow tax-free until withdrawn 
in retirement. In April 2006, the House Committee on Oversight and 
Government Reform held hearings on TSP issues, resulting in concerns 
being raised about the adequacy of the current oversight structure of 
TSP. The Federal Retirement Thrift Investment Board (FRTIB) is 
responsible for day-to-day operations of TSP, and the Department of 
Labor (DOL) has some oversight responsibilities, primarily through 
conducting audits of TSP's operations. Subsequently, you asked us to 
examine (1) the current structure for overseeing FRTIB, (2) how the 
statutorily defined fiduciary[Footnote 1] responsibilities of FRTIB 
compare to the responsibilities of private plan sponsors and how FRTIB 
fulfills its responsibilities, (3) how FRTIB's investment policies 
differ from those of private plan sponsors, and (4) FRTIB's statutory 
responsibilities to educate plan participants about TSP and other 
retirement issues and how these responsibilities compare with those of 
private and state and local government employee plan sponsors.[Footnote 
2] 

To address our objectives, we analyzed provisions of the Federal 
Employees' Retirement System Act of 1986 (FERSA),[Footnote 3] which 
governs the administration of TSP, and the Employee Retirement Income 
Security Act of 1974 (ERISA),[Footnote 4] which governs the 
administration of pension plans in the private sector. To examine the 
current structure for overseeing FRTIB, as well as our other 
objectives, we interviewed DOL officials, and analyzed various 
documents from both DOL and FRTIB, including DOL regulations, audit 
manuals, and reports. Additionally, to determine how FRTIB's 
statutorily defined fiduciary responsibilities compare to the 
responsibilities of private plan sponsors, and how FRTIB fulfills its 
responsibilities, as well as what FRTIB's investment policies are and 
how its policies differ from those of private plan sponsors, we 
interviewed representatives of industry associations and reviewed 
related documents, including FRTIB memos, policies, Board meeting 
minutes, and correspondences, and DOL's guidance to private plan 
sponsors. To determine FRTIB's responsibilities for educating plan 
participants about TSP and other retirement issues, we examined 
information from TSP's Web site, spoke with Office of Personnel 
Management (OPM) officials, and reviewed FRTIB documents. To compare 
FRTIB's education responsibilities with those of other plan sponsors, 
we interviewed representatives of industry associations, and officials 
representing sponsors of five defined contribution plans--four state 
and local government employee pension plans and one private 
plan.[Footnote 5] We selected plan sponsors based on plan assets, plan 
type, and absence of fiduciary malfeasance. Appendix I describes the 
selection of plan sponsors in greater detail. We also reviewed a 2005 
industry survey to obtain additional information about how private plan 
sponsors educate their participants.[Footnote 6] We conducted our work 
between August 2006 and June 2007 in accordance with generally accepted 
government auditing standards.[Footnote 7] 

Results in Brief: 

DOL and Congress both play roles in overseeing FRTIB. Under TSP's 
authorizing statute, DOL is charged with establishing and conducting an 
audit program of FRTIB to determine the level of compliance with 
requirements relating to fiduciary[Footnote 8] responsibilities and 
other transactions.[Footnote 9] According to DOL officials, the audit 
program covers all significant aspects of TSP operations, including 
FRTIB policy formulation and administration as well as functions 
performed by service providers, like record keeping. While FRTIB and 
its service providers are not required to implement DOL's audit 
recommendations, they have generally implemented a high percentage of 
the recommendations. In addition to oversight from DOL, FRTIB--like 
other federal agencies--is subject to congressional oversight. While 
Congress exercises its legislative oversight authority by holding 
occasional hearings and requiring FRTIB to submit routine reports, 
oversight has not involved regular hearings. Hearings on FRTIB have 
typically been in response to challenges with TSP or proposed 
legislative changes. Also, DOL does not submit its audit reports 
directly to Congress, nor is there any other specific mechanism in 
place through which DOL reports areas of critical concern to Congress. 

FRTIB's fiduciary duties are similar to those of fiduciaries of private 
sector plans. Both FERSA and ERISA, the statute that governs private 
sector pension plans, require fiduciaries to act prudently and solely 
in the interest of plan participants and beneficiaries. To fulfill its 
fiduciary duties, FRTIB has implemented policies and practices in 
several of the areas mentioned in DOL's guidance for private sector 
plans. For example, FRTIB selects and closely monitors service provider 
companies, which carry out many of TSP's operations, including managing 
all but one of the investment funds. However, unlike private plan 
fiduciaries, Board members and the Executive Director are not subject 
to civil actions by DOL for the breach of their duties or for engaging 
in certain transactions. DOL is authorized to bring civil actions 
against fiduciaries of private plans and other TSP fiduciaries, such as 
the company providing investment management services. However, a 1988 
amendment to FERSA exempted Board members and the Executive Director 
from DOL's authority to bring such actions. 

FRTIB has less discretion than private sector plan sponsors in setting 
investment policy; the investment options available to TSP participants 
are largely outlined in law, whereas private sector plan sponsors are 
responsible for choosing investment options to offer participants. 
According to DOL, an important part of the fiduciary duties of acting 
prudently and solely in participants' interest involves selecting 
investment options. For TSP, FERSA specifies the number and types of 
funds, such as one that invests in Treasury securities or in stocks of 
large U.S. companies, and requires that some of these funds track 
indexes, which are broad, diversified market indicators like the 
Standard & Poor's 500. FRTIB, then, may select the particular indexes 
for the funds to follow as well as review the investment options and 
suggest additional funds. Any change in TSP options, however, requires 
legislation. For example, in 1995, the Board submitted a legislative 
proposal to add funds for international stocks and for stocks in small 
and medium-sized U.S. companies, and Congress amended FERSA the next 
year. Unlike FRTIB, private plan sponsors have the authority to choose 
which investment options to offer plan participants. Although ERISA and 
its regulations require that they offer diversified options, private 
plan sponsors can determine, among other things, the number and type of 
funds in their plans, and whether to include funds that track a 
specific market index or those that specialize in one sector, like 
telecommunications. 

FRTIB and OPM are responsible for educating participants about TSP and 
general retirement issues; private and state and local government 
employee pension plan sponsors we spoke with, while governed by 
different rules, are responsible for educating participants 
specifically about their plans, but often choose to provide employees 
with additional retirement information. Under FERSA, FRTIB is 
responsible for developing educational materials for participants about 
TSP-specific issues, such as descriptions of investment 
options.[Footnote 10] For example, FRTIB provides information about TSP 
fund options and their past rates of return on its Web site, automated 
call line, and in written materials. FRTIB also assists OPM, which is 
required to provide general retirement education to federal employees 
and ensure that retirement counselors at federal agencies are trained 
to provide workers information on topics such as making contributions 
or withdrawals from TSP.[Footnote 11] Private sector plan sponsors 
under ERISA are required to provide information to participants on the 
investment options in their plan, but are not required to provide 
general retirement education information, although many plan sponsors 
do. For example, the private sector plan sponsor we spoke with 
contracts with a service provider to give employees one-on-one 
financial and investment counseling. State and local government 
employee pension plan sponsors' responsibilities vary based on the 
rules governing the plan, but the four plans we studied educated 
participants about not only plan-specific issues, but other matters. 
For example, the public plans gave participants tools to calculate how 
much they will need to save for retirement. 

Background: 

The Federal Employees' Retirement System Act of 1986 (FERSA) created 
TSP to provide options for retirement planning and encourage personal 
retirement savings among the federal workforce. Most federal workers 
are allowed to participate in TSP, which is available to federal and 
postal employees, including members of Congress and congressional 
employees and members of the uniformed services, and members of the 
judicial branch.[Footnote 12] 

As of February 2007, TSP held approximately $210 billion in retirement 
assets for 3.7 million current and former federal employees and their 
families. Participants may allocate their contributions and any 
associated earnings among five investment fund options: the G Fund, F 
Fund, C Fund, S Fund, and I Fund.[Footnote 13] Since August 2005, TSP 
participants also may choose one of five Lifecycle funds, which 
diversify participant accounts among the G, F, C, S, and I Funds, using 
investment mixes that are tailored to different time horizons for 
retirement and withdrawal. The investment mix of each Lifecycle fund 
adjusts quarterly to more conservative investments as the participant 
nears retirement. 

Pension plans are classified either as defined benefit or as defined 
contribution plans. Defined benefit plans promise to provide, 
generally, a fixed level of monthly retirement income that is based on 
salary, years of service, and age at retirement regardless of how the 
plan's investments perform. In contrast, benefits from defined 
contribution plans are based on the contributions to and the 
performance of the investments in individual accounts, which may 
fluctuate in value. Examples of defined contribution plans include 
401(k) plans,[Footnote 14] employee stock ownership plans, and profit- 
sharing plans. 

As with other defined contribution plans, TSP is structured to allow 
eligible federal employees to contribute a fixed percentage of their 
annual base pay or a flat amount, subject to Internal Revenue Service 
limits, into an individual tax-deferred account. Additionally, FERS 
participants are eligible for automatic 1 percent contributions and 
limited matching contributions from the employing federal agency. 
According to FRTIB, TSP provides federal (and in most cases, state) 
income tax deferral on contributions and their related earnings, 
similar to those offered by many private sector 401(k)-type pension 
plans. Participants can manage their accounts and conduct a variety of 
transactions similar to those available to 401(k) participants, such as 
reallocating contributions, borrowing from the account, making 
withdrawals, or purchasing annuities. 

Administration of TSP falls under the purview of the Federal Retirement 
Thrift Investment Board, an agency established by Congress under FERSA. 
FRTIB is composed of five Board members appointed by the President, 
with the advice and consent of the Senate.[Footnote 15] They are 
authorized to appoint the Executive Director, who hires additional 
personnel,[Footnote 16] and an Employee Thrift Advisory Council. The 
Employee Thrift Advisory Council is a 15-member council that provides 
advice to the Board and the Executive Director on the investment 
policies and administration of the TSP.[Footnote 17] The Board is 
responsible for establishing policies for the investment and management 
of the TSP, as well as administration of the plan. The Executive 
Director and staff of FRTIB are responsible for implementing the 
Board's policies and managing the day-to-day operations of TSP, 
prescribing regulations to administer FERSA, and other duties. The 
Board members and the Executive Director serve as plan fiduciaries. 

DOL and Congress Oversee FRTIB, but Oversight Has Not Included Regular 
Hearings: 

The Department of Labor and Congress both play roles in overseeing 
FRTIB. As we have previously reported, DOL is charged with conducting 
regular compliance audits to determine if the Board is fulfilling its 
fiduciary duties and properly safeguarding TSP participants' 
assets.[Footnote 18] Congress created FRTIB and has the ability to 
change the structure for overseeing FRTIB. As with every federal 
agency, Congress may exercise oversight of FRTIB. Currently, Congress 
requires FRTIB to submit its budget and other reports regularly, but it 
has not typically held hearings unless a challenge has arisen or there 
has been a proposed change to legislation. In addition, DOL officials 
do not have in place a specific mechanism for sharing their audit 
program findings or other issues of concern with Congress. 

DOL Oversees FRTIB through Regular Audits: 

DOL's oversight of FRTIB is based on a FERSA requirement that the 
Secretary of Labor establish an audit program and conduct audits of 
FRTIB and its operations.[Footnote 19] DOL compliance audits are 
designed to determine whether FRTIB is complying with FERSA and 
applicable laws and regulations. This includes whether TSP fiduciaries 
are acquiring, protecting, and using plan resources prudently, 
efficiently, and solely in the interest of participants and 
beneficiaries. The DOL Employee Benefits Security Administration's 
(EBSA)[Footnote 20] Office of the Chief Accountant has administered the 
audit program since its inception in fiscal year 1988. According to DOL 
officials, DOL's audit program reviews all significant activities of 
FRTIB, including FRTIB's policy formulation and administration, record 
keeping, and other functions handled by service providers under 
contract, and functions of federal agencies related to contributions 
and employee participation programs. The audits include on-site reviews 
of TSP's principal service providers. Because service providers carry 
out many day-to-day operations of TSP, from record keeping to 
investment management, audits are primarily conducted on TSP's service 
providers. DOL officials have developed an audit manual that includes 
detailed audit guides, but a firm carries out the audits under contract 
with DOL. DOL officials said that their ongoing audit presence for TSP 
is greater than its presence for most of the private plans it oversees, 
which numbered about 730,000 in 2002. 

According to DOL, each year, DOL develops a strategic plan that 
identifies how many and which functions it could audit based on risk 
and funding. For example, due to FRTIB's increased use of private 
contractors to provide call center and other plan services formerly 
provided by the U.S. Department of Agriculture's National Finance 
Center, two of DOL's five audits in fiscal year 2006 looked at 
particular operations of newer providers, including certain internal 
controls. DOL officials also said that the number of audits in a given 
year is based on the level of funding allocated to the audit program. 
Fiscal year 2006 funding for the contract audits was $630,000 and 
covered five audits.[Footnote 21] 

DOL exercises its authority over FRTIB by making recommendations for 
improving operations based on audit findings. DOL officials and the 
contract auditor meet with the Board members at least once a year to 
highlight significant issues from audits and to present the 
department's future compliance audit schedule. DOL's recommendations to 
FRTIB and its service providers generally address compliance with FERSA 
and FRTIB policies, significant weaknesses in internal controls, or 
areas where FRTIB could improve the efficiency and effectiveness of its 
operations. For example, during its fiscal year 2005 audit cycle, DOL's 
contractor audited one of FRTIB's customer call centers, which is 
operated by a contractor. The audit report included recommendations for 
FRTIB to implement and enforce policies for information security, 
designated as a fundamental internal control by DOL, at the 
contractor's sites; establish additional performance measures; and 
implement consistent monitoring of call volume at the two call centers. 
As of September 2006, DOL considered the first recommendation partially 
implemented and the other two recommendations implemented. DOL cannot 
compel FRTIB or its service providers to implement its audit 
recommendations. However, FRTIB generally had implemented a high 
percentage of DOL's audit recommendations.[Footnote 22] According to 
DOL and FRTIB officials, this voluntary implementation of audit 
recommendations has worked well for them because DOL and FRTIB have a 
longstanding and positive working relationship. 

Congress' Oversight of FRTIB Has Not Involved Regular Hearings: 

Congress has not required FRTIB or DOL to testify regularly before 
Congress on TSP operations, although it does receive routine reports 
from FRTIB. As with other federal agencies, Congress may exercise 
oversight of FRTIB by investigating agency operations, holding 
hearings, issuing subpoenas, and requiring the agency to submit 
performance or financial reports. Congressional committees have 
typically held hearings on TSP when a challenge has arisen or when 
there was a proposed change to legislation. For example, FRTIB 
officials were asked to testify in response to customer service issues 
with TSP in 2003 and in response to abusive trading practices in the 
private sector in 2004. In the 20 years since TSP has been in 
existence, FRTIB estimates it has been called to testify approximately 
a dozen times. Most recently, Board members and the Executive Director 
provided testimony in 2005 and 2006 about adding a new fund to TSP's 
investment options. According to DOL officials, Congress does not 
require DOL to meet with committee staff or testify about TSP or its 
audit findings on a regular basis. DOL has testified at least three 
times on its audit program --in 1994, 2003, and 2004. 

Congress requires FRTIB to submit its budget and to have an independent 
financial audit each year, performed under contract by a public 
accounting firm. FRTIB also provides a list of each audit report, 
including DOL's compliance audits, and summaries of any particularly 
significant findings, to Congress each year, as required by the 
Inspector General Act of 1978.[Footnote 23] The 2006 summary contained 
little information about audit recommendations. DOL is not required to 
submit its audit reports directly to Congress, and Congress has not 
asked DOL to share its audit findings on a regular basis through 
hearings or meetings with committee staff. Consequently, Congress may 
be unaware of concerns DOL may have. In a 2003 report, we noted that 
there have been times when DOL has had issues of concern with FRTIB 
outside of its audit findings. We recommended that Congress consider 
amending FERSA to require DOL to establish a formal process by which 
the Secretary of Labor can report to Congress areas of critical concern 
about the actions of the Executive Director and Board members, but no 
changes have yet been made.[Footnote 24] 

TSP's Fiduciaries Have Similar Duties to Those of Private Plan 
Fiduciaries, but TSP Board Members and the Executive Director Have 
Special Liability Protections: 

FRTIB's fiduciary duties are similar to those of private sector plan 
fiduciaries, and FRTIB has adopted various policies and practices to 
fulfill these responsibilities, but unlike private plan fiduciaries, 
Board members and the Executive Director have special liability 
protections. Both FERSA and ERISA require fiduciaries to act prudently 
and solely in the interest of plan participants and beneficiaries. 
However, unlike ERISA, FERSA does not authorize DOL to bring civil 
action against Board members or the Executive Director for the breach 
of their duty, whereas DOL can take such actions against fiduciaries of 
private plans and other TSP fiduciaries. Congress amended FERSA to 
provide special liability protections for the Board members and the 
Executive Director, given the potential assets of TSP and concerns 
about the availability of fiduciary insurance. 

FRTIB Fiduciary Duties Are Similar to Private Plan Fiduciary Duties, 
and FRTIB Has Adopted Policies and Practices to Fulfill Its Duties: 

FRTIB and private plan fiduciaries have similar fiduciary duties. TSP's 
authorizing statute, FERSA, and ERISA set the overarching requirements 
for fiduciaries to act prudently and solely in the interest of plan 
participants and beneficiaries.[Footnote 25] That is, fiduciaries must 
exercise an appropriate level of care and diligence given the scope of 
the plan and act for the exclusive benefit of plan participants and 
beneficiaries, rather than for their own or another party's gain. In 
addition, FERSA and ERISA specifically prohibit fiduciaries from 
engaging in certain transactions that that could raise questions about 
their ability to fulfill their duties, unless certain safeguards are 
met or waivers are granted by DOL.[Footnote 26] For TSP, the statute 
specifically lists Board members, the Executive Director, and any 
person who has or exercises discretionary authority or control over the 
management or disposition of TSP assets as fiduciaries.[Footnote 27] 

FRTIB has adopted a range of policies and practices that are similar to 
those that private plans should follow to carry out these broad duties. 
DOL has issued guidance for private plans describing important policies 
and practices to fulfill fiduciary responsibilities. While the guidance 
is not specifically designed for TSP, FRTIB has implemented policies 
and practices for several of the areas in DOL's guidance.[Footnote 28] 
For example, FRTIB has policies and practices for selecting and 
monitoring service providers, as well as measuring investment 
performance. Because private service providers perform many of TSP's 
operations, including record keeping for participant accounts and 
investment management of all funds but one, these areas are important 
for acting prudently and solely in the interest of participants and 
beneficiaries. Specifically: 

* FRTIB generally uses a competitive process in order to select 
qualified service providers at a reasonable cost. According to FRTIB, 
contracts for major activities undergo review and competition at least 
every 5 years. While we did not review its procurement documentation, 
DOL reviews the selection and monitoring of service providers as part 
of its compliance audit program.[Footnote 29] 

* FRTIB noted that it uses several approaches to monitor service 
providers. FRTIB has included performance measures in certain service 
providers' contracts. Also, since 2004, FRTIB has reviewed quarterly 
financial reports for most of its major private providers, including 
financial statements, credit scores, and overall viability.[Footnote 
30] FRTIB further noted that it monitors providers through daily 
contact with them, periodic on-site visits, and reports from the 
provider, such as monthly and annual reports from the annuity vendor. 

* FRTIB also reviews its performance measures monthly, including the 
investment performance of each fund. The company providing investment 
management services must provide monthly reports to FRTIB showing how 
closely each option is tracking its underlying index. A measure of the 
difference between the performance of the TSP fund and the underlying 
index is known as the "tracking error," and by contract, the investment 
manager must report the amount and reasons for the error. Because the 
investment manager is allocated fiduciary responsibility by contract, 
given the manager's control of plan assets, this measurement of 
performance is essential for both FRTIB and the investment manager to 
act prudently and ensure that the investment manager is not trading 
needlessly or for self-gain.[Footnote 31] 

DOL Can Take Civil Action against Private Plan Fiduciaries but Cannot 
Do So against TSP Board Members and the Executive Director: 

The Secretary of Labor can take civil action against private plan 
fiduciaries. Under ERISA, DOL is allowed to seek remedies if 
fiduciaries of private plans do not fulfill their fiduciary duties, 
including using litigation when necessary.[Footnote 32] According to 
DOL, its primary goal in litigating a case is to ensure that a plan's 
assets, and therefore its participants and beneficiaries, are 
protected. For example, DOL has brought legal actions or filed briefs 
against private plan fiduciaries for investing imprudently in company 
stock, not investing exclusively for participants' benefit, and failing 
to monitor appointed fiduciaries. 

DOL cannot bring civil actions against Board members or the Executive 
Director for breaching their plan duties or engaging in prohibited 
transactions. FERSA allows DOL to bring civil actions against any 
fiduciary, such as the investment manager, other than a Board member or 
the Executive Director. While DOL was initially authorized under FERSA 
to bring civil actions against any TSP fiduciary,[Footnote 33] a 1988 
amendment established an exception from such actions for Board members 
and the Executive Director.[Footnote 34] The 1988 amendment was passed, 
in part, in response to FRTIB's concerns about obtaining fiduciary 
insurance. According to the then-Executive Director, it would be 
difficult to buy adequate insurance for these TSP fiduciaries, as FRTIB 
officials expected TSP to become the largest plan of its kind in the 
country.[Footnote 35] Congress took this action in the face of concerns 
that, without protection, Board members would resign and that they 
would be hard to replace. 

With regard to plan participants' recourse, participants can take civil 
action against private plan fiduciaries and all FRTIB fiduciaries, 
including Board members and the Executive Director.[Footnote 36] Under 
ERISA, available remedies include awards for plan losses through 
monetary damages and restoring any profits made from a fiduciary's 
improper use of plan assets.[Footnote 37] Fiduciaries of private plans 
may guard against the legal risks of personal liability by having 
fiduciary liability insurance, which the fiduciary, the plan, or the 
employer may purchase.[Footnote 38] Fiduciary liability insurance 
provides reimbursement for costs related to legal actions for breach of 
their fiduciary responsibilities, including the costs of defending and 
settling actions or awards of monetary damages. DOL officials said that 
although fiduciaries of private pension plans may have insurance to 
largely insulate them from the personal risks associated with their 
personal liability as fiduciaries, they still face financial risks in 
certain circumstances due to policy limits or exclusions. For example, 
fiduciary liability insurance often includes coverage exceptions for 
intentional harm, criminal acts, or self-dealing. 

Similarly, under FERSA, TSP participants or beneficiaries may bring 
civil actions against Board members or the Executive Director, as well 
as other TSP fiduciaries, for breaching their plan duties or engaging 
in prohibited transactions. The 1988 amendment provided that any such 
claims against a Board member or the Executive Director will be 
defended by the Attorney General of the United States and, if he 
certifies that the Board member or Executive Director was acting as a 
TSP fiduciary, deemed claims under the Federal Tort Claims Act 
(FTCA).[Footnote 39] As a result, rather than any monetary relief 
awarded in such cases being paid personally by any Board member or 
Executive Director who may commit a breach (or through applicable 
fiduciary liability insurance), it would be paid out of the Judgment 
Fund established to pay claims under the FTCA.[Footnote 40] According 
to DOL officials, treating claims against a Board member or the 
Executive Director in this way provides TSP participants with a greater 
ability to obtain monetary relief than that available to participants 
in other pension plans. In addition, DOL officials told us that without 
the special liability protections, DOL could be in the unusual position 
of suing FRTIB--another federal entity--and receiving assistance with 
prosecutions from the Department of Justice, which is also responsible 
for defending Board members or the Executive Director. 

TSP has been relatively free from any allegations that TSP fiduciaries 
have breached their fiduciary duties or engaged in prohibited 
transactions. DOL and FRTIB officials were aware of only one civil 
claim against the Board, which is currently pending in federal district 
court.[Footnote 41] 

TSP Fiduciaries Have Limited Discretion over Investment Policy Compared 
to Fiduciaries of Private Plans: 

The Board has less discretion than private sector plan sponsors in 
setting investment policy because the investment options available to 
TSP participants are largely outlined in law, whereas private sector 
plan sponsors are responsible for choosing which investment options to 
offer participants. FRTIB may select the particular indexes for the 
funds to follow as well as review the investment options and suggest 
additional funds. However, Congress must amend FERSA to approve a 
change in TSP investment options offered to participants. 

FERSA Prescribes TSP Investment Options: 

FRTIB has limited discretion in setting investment policy because FERSA 
largely sets the investment options available to TSP participants. DOL 
and FRTIB officials noted that FERSA serves as TSP's overall investment 
policy. FERSA states that FRTIB shall establish a government securities 
investment fund, fixed income investment fund, a common stock index 
investment fund, a small capitalization stock index investment fund, 
and an international stock index investment fund.[Footnote 42] For the 
index funds, FERSA states that the Board shall invest in a portfolio 
designed to replicate the performance of a commonly recognized index 
for that fund. For the government securities investment fund, FERSA 
states that the Secretary of the Treasury is authorized to issue 
special interest-bearing obligations of the United States for the 
purchase by TSP. FERSA has other investment policy provisions, such as 
who can exercise voting rights associated with the ownership of stocks 
held by TSP.[Footnote 43] 

FRTIB has developed individual policies for each fund. These policies, 
which FRTIB reaffirms quarterly, provide the rationale for selecting 
the fund's investments. Factors influencing the policies include the 
level of risk and return, low costs, and the legislative history of 
FERSA. A consultant to FRTIB reported in January 2006 that the indexes 
that FRTIB selected were appropriate and changes to certain indexes 
would not be cost-effective. Table 1 shows FERSA requirements and 
FRTIB's policies for each fund. 

Table 1: FERSA and FRTIB Investment Policies for Each TSP Fund: 

Fund: G Fund; 
FERSA requires the Fund to be invested in: Treasury securities 
specially issued to TSP with a maturity determined by the Executive 
Director that provide the generally higher interest rates of securities 
with a term of at least 4 years; 
FRTIB policies call for investing the Fund in: Short-term securities 
(that mature in 1 to 4 days). 

Fund: F Fund; 
FERSA requires the Fund to be invested in: Fixed-income securities; 
FRTIB policies call for investing the Fund in: An index including bonds 
and asset-backed securities to track the Lehman Brothers U.S. Aggregate 
Index. 

Fund: C Fund; 
FERSA requires the Fund to be invested in: A portfolio that tracks a 
broad index representing the U.S. stock market; 
FRTIB policies call for investing the Fund in: An index of stocks of 
large to medium-sized companies to track the Standard & Poor's 500 
Index. 

Fund: S Fund; 
FERSA requires the Fund to be invested in: A portfolio that tracks a 
broad index representing U.S. stocks not included in the C Fund; 
FRTIB policies call for investing the Fund in: An index of stocks in 
small and medium-sized companies not represented in the Standard & 
Poor's 500 to track the Dow Jones Wilshire 4500 Completion Index. 

Fund: I Fund; 
FERSA requires the Fund to be invested in: A portfolio that tracks a 
broad index representing international stock markets outside of the 
United States; 
FRTIB policies call for investing the Fund in: An index of the stock 
markets of the developed world outside of the United States and Canada 
to track the Morgan Stanley Capital International Europe, Australasia, 
and Far East Index. 

Source: GAO analysis. 

[End of table] 

In the past, FRTIB has periodically conducted a major review of its 
investment policy and suggested additional funds for TSP to Congress 
besides the initial G, F, and C Funds. FRTIB's process for reviewing 
and suggesting additional funds has included investment analysis, 
consideration of industry practices, and communication with Congress 
and the Employee Thrift Advisory Council, which represents 
participants. For example, in the early 1990s, FRTIB analyzed possible 
funds to add to the lineup of options for participants to invest in, 
based on factors like diversification, risk and return, cost, and 
administrative issues. It submitted a legislative proposal in 1995 to 
add funds for international stocks (the I Fund) and for stocks in small 
and medium-sized U.S. companies (the S Fund), and Congress amended 
FERSA in 1996 accordingly.[Footnote 44] In 2005, FRTIB introduced 
Lifecycle funds without an amendment to FERSA because it determined 
that the Lifecycle funds are combinations of the five existing funds 
tailored to different time horizons for withdrawal. FRTIB developed 
these funds partly based on its analysis of inefficient participant 
behavior whereby participants were not periodically shifting, or 
rebalancing, their investment portfolio or diversifying their balances 
among the five funds, which the Lifecycle funds would do automatically 
for the participant. In 2005, given congressional interest in having 
FRTIB study the desirability of adding new funds, FRTIB hired an 
outside consultant to analyze the existing TSP options, who recommended 
in 2006 that FRTIB not add any additional funds to the plan. According 
to FRTIB, having relatively few TSP options based on broad-based 
indexes encourages participation and limits costs. 

Private Plan Sponsors Have Greater Discretion to Select Investment 
Options: 

Private plans under ERISA have considerable latitude in selecting 
investment options for their plans. According to DOL, an important part 
of the fiduciary duties of acting prudently and solely in participants' 
interest involves selecting investment options. ERISA requires plan 
fiduciaries to use prudence in selecting and monitoring funds for 
participants, and to offer diversified funds. Within these parameters, 
private plans can offer a wide array of options for participants. 
Unlike TSP, private plans can decide, among other things, the number 
and types of funds, whether to include funds that specialize in one 
sector, like telecommunications, or those that track a specific market 
index. Besides funds tracking a specific market index, which are one 
kind of passively managed funds, private plans can offer actively 
managed options, in which the investment manager selects particular 
investments trying to obtain higher than average returns. Private plan 
sponsors also may offer employer stock.[Footnote 45] Further, private 
plans can also offer features like a self-directed brokerage option, 
which allows participants to invest in individual stocks or mutual 
funds. 

Given that private plans have greater discretion than TSP to select 
options, many private plans have adopted an investment policy statement 
to guide their decision-making process. According to a 2005 industry 
survey,[Footnote 46] 79 percent of responding plans had an investment 
policy statement. While these statements are not required by ERISA, DOL 
has issued regulations about written statements of investment policy. 
The regulations note that a statement may set guidelines about 
investment decisions for the investment manager.[Footnote 47] According 
to one industry association, besides clarifying the intended goals and 
performance of the plan, the statement--which may include the process 
for selecting, monitoring, and altering investments--can guide future 
decisions and limit liability by showing that fiduciaries are following 
a prudent process. 

FRTIB and Other Federal Agencies Have Responsibility for Educating 
Participants on Retirement Issues, and Responsibilities Vary for 
Private and State and Local Government Employee Plans: 

FRTIB, OPM, and staff of employing federal agencies have responsibility 
for educating TSP participants about their retirement plan and other 
retirement issues, and responsibilities vary for private and state and 
local government employee plans. FRTIB has responsibility for providing 
information to TSP plan participants to facilitate informed decision 
making about what level of contribution to make and how to invest those 
contributions. OPM is required to establish a training program for all 
retirement counselors and to develop, in consultation with FRTIB, a 
retirement financial literacy and education strategy for federal 
employees.[Footnote 48] Retirement counselors are employed by federal 
agencies, and they provide employees with information on their 
retirement benefits, including information about TSP. ERISA requires 
private retirement plan sponsors to provide certain documents to 
participants, such as a summary plan description, but many plans 
provide more information than is required.[Footnote 49] State and local 
government employee plans' education requirements vary, but all of the 
plans we studied are required to provide participants with benefit 
statements. They also make other types of information available to 
participants, such as tools for calculating retirement needs. 

FRTIB Develops TSP-Specific Educational Materials, and OPM Provides 
General Retirement Education: 

FERSA requires FRTIB to provide participants with periodic statements 
about their accounts and a summary description of the plan's investment 
options to facilitate informed decision making.[Footnote 50] To further 
inform participants about the plan, FRTIB provides additional 
information, such as how to roll over or transfer funds from other 
plans into TSP, information on agency matching contributions, TSP's 
loan program, and the monthly returns of TSP funds and their related 
indexes. FRTIB provides this information on TSP's Web site. According 
to FRTIB, the TSP Web site is its primary method for communicating with 
participants, but information is also available by telephone, and in 
written materials. The TSP Web site also includes a retirement 
calculator that participants can use to estimate how much they will 
need to save each year to meet their retirement goals, and a quarterly 
newsletter. For example, the newsletter's January 2007 feature article 
was titled "Pension Reform Law Benefits TSP Participants," and included 
information about provisions in the Pension Protection Act of 2006 that 
apply to TSP. In addition to the educational materials available on the 
TSP Web site, FRTIB occasionally sends mailings to TSP participants. 
For example, mailings were sent to participants raising awareness about 
the new Lifecycle funds. 

OPM is responsible for providing general retirement education to 
federal employees, including TSP participants, and it does this 
primarily through training retirement counselors at federal agencies, 
who provide federal employees with information on retirement benefits, 
including TSP. Retirement counselors' roles were expanded with passage 
of the Thrift Savings Plan Open Elections Act of 2004.[Footnote 51] To 
implement the act, OPM's training will include information about 
retirement financial literacy and education. According to information 
provided by OPM, it will provide comprehensive training on the tools 
and resources it is developing, such as the retirement readiness index, 
an age-based profile containing information about an employee's state 
of readiness according to various dimensions. As of April 2007, OPM had 
produced and made available on its Web site a retirement video. 
According to OPM, the video provides an overview of critical 
information federal employees need to know as they plan for their 
retirement. OPM is required to consult with FRTIB about its 
implementation of the act. In addition to retirement counselors, 
federal agencies have TSP agency coordinators that, among other things, 
inform eligible employees of TSP options and benefits, maintain TSP 
informational materials, and respond to inquiries from active 
employees. TSP officials offer training to agency coordinators. 
Sometimes individuals serve as both agency coordinators and retirement 
counselors. 

Private Plan Sponsors Are Responsible for Informing Participants about 
Their Plans, and Responsibilities Vary for State and Local Government 
Employee Plan Sponsors: 

The Employee Retirement Income Security Act of 1974 (ERISA) requires 
plan sponsors to give plan participants in writing the information they 
need to know about their retirement benefit plans, including plan 
rules, financial information, and documents on the operation and 
management of the plan. ERISA requires sponsors of private retirement 
plans to make available to participants the following: 

* an annual report, which is a summary of an annual financial report 
that most plans must file with the Department of Labor; 

* a summary plan description, which provides information about what the 
plan provides and how it operates, such as when an employee can begin 
to participate, how service and benefits are calculated, when benefits 
become vested, when and in what form benefits are paid, and how to file 
a claim for benefits; and: 

* account statements one or more times per year or upon 
request.[Footnote 52] 

A 2005 industry survey found that many private plan sponsors provide 
additional educational information, not required under ERISA, for such 
purposes as increasing employee participation, increasing satisfaction 
with their plans, and improving asset allocation.[Footnote 53] They 
provide this information through enrollment kits, seminars and 
workshops, fund performance sheets, newsletters, retirement 
calculators, and Internet and intranet sites. For example, the private 
plan sponsor we spoke with provides one-on-one financial and investment 
counseling to its employees through a service provider. Additionally, 
almost half of the plans that responded to the industry survey 
indicated that they offer participants investment advice. 

State and local government employee pension plan sponsors are required 
to educate their participants in a manner consistent with the state or 
local requirements and plan documents that govern their plans. Each of 
the four plans we studied require that a statement be sent to 
participants periodically or at the participant's request. At least two 
of the plan sponsors provide participants with summary plan 
descriptions, and at least one plan sponsor requires that participants 
be sent an annual report. Local and state officials expressed the 
importance of providing plan participants with information on a broad 
range of services and topics, for example, how to make contributions 
and the array of investment options. Each plan sponsor provides some 
information on its Web site; such information may include answers to 
frequently asked questions, forms, and information about investment 
options and retirement planning conferences. All of the officials we 
spoke with provide some type of general retirement information or non- 
plan-specific information to participants, such as retirement 
calculators. Three of the plan sponsors make general retirement 
information available to their participants through service providers. 

Conclusion: 

Through FERSA, Congress established FRTIB to administer TSP and charged 
DOL with establishing a program to carry out audits to determine the 
level of TSP compliance with FERSA requirements. According to DOL, its 
audit findings and recommendations provide details on all significant 
aspects of TSP operations, from the management of TSP investments to 
the information security of participants' data, and can also shape 
future oversight of FRTIB and its service providers. Although FRTIB is 
required by law to provide Congress each year with a list of audits, 
including summaries of significant DOL audit findings, there have been 
times when DOL has had issues of concern with FRTIB outside of its 
audit findings. In such instances, DOL has no formal process to 
communicate its issues of dispute. Consequently, we previously 
recommended that Congress amend FERSA to require DOL to establish a 
formal process by which it can report to Congress issues of critical 
concern. 

Historically, communications between congressional committees of 
jurisdiction with FRTIB and DOL have been limited. Although Congress 
has occasionally held hearings where DOL and FRTIB officials have 
testified, such hearings are held irregularly, usually in response to a 
particular issue, such as abusive trading practices or when Congress 
was considering legislative changes to FERSA, such as adding an 
additional fund to TSP's investment options. 

Congress created TSP as one of the basic elements of a new retirement 
system for federal workers. Since its inception, TSP has grown to 
become one of the largest defined contribution plans in the country, 
affecting the retirement of millions of current and former federal 
employees. As the size and complexity of TSP have grown, an appropriate 
level of oversight of FRTIB is critical to ensuring that federal 
workers' retirement savings are properly managed. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Federal Retirement Thrift 
Investment Board (FRTIB), the Department of Labor (DOL), and the Office 
of Personnel Management (OPM) for review and comment. FRTIB suggested 
that the report will be useful to the continued improvement of the TSP, 
and expressed appreciation for our constructive approach in conducting 
the review. Both FRTIB and DOL provided technical comments, which we 
have incorporated where appropriate. FRTIB's written comments are 
reproduced in appendix II. 

As agreed with your staff, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time, we will send copies of this report 
to the Executive Director of FRTIB, the Secretary of DOL, and the 
Director of OPM, appropriate congressional committees, and others who 
are interested. We will also make copies available to others upon 
request. In addition, the report will be available at no charge on 
GAO's Web site at http://www.gao.gov. If you have any questions about 
this report, please call me at (202) 512-7215. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors are listed in appendix 
III. 

Barbara D. Bovbjerg, Director: 
Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Selection of the Plan Sponsor Comparison Group: 

To compare the Federal Retirement Thrift Investment Board's (FRTIB) 
education responsibilities with those of other plan sponsors, we 
reviewed documents and interviewed officials representing sponsors of 
five defined contribution plans--four government employee pension plans 
and one private plan. The plans we studied were selected from a list of 
the 200 largest U.S. employee retirement plans as reported by Pensions 
& Investments, a trade journal for plan sponsors and other investors, 
as of September 30, 2005. Plans were selected based on three criteria-
-plan assets, plan type, and absence of fiduciary malfeasance. TSP is 
the largest defined contribution plan in the nation. The plans we 
studied, while having significantly fewer assets than TSP, were among 
the largest in total defined contribution plan assets. The five plans 
had assets ranging from approximately $3 billion to $21 billion. The 
plans we studied, like TSP, are participant directed, that is, 
investors make investment decisions and plan fiduciaries may receive 
limited liability from the results of these decisions.[Footnote 54] 
Additionally, we reviewed Pension & Investments Online and LexisNexis, 
and could find no citations over the last 2 years for fiduciary 
malfeasance for the five plans we studied. 

The four government employee pension plans we studied are a state 
supplemental 401(k) plan, a state 401(k) plan for all newly hired 
employees, a university plan that includes a 401(a) plan and a tax 
deferred 403(b) plan, and a large city supplemental deferred 
compensation plan with a 401(k) plan. The private plan was a Fortune 
100 company. We contacted seven private pension plans, but only one 
agreed to speak with GAO staff. The private plan sponsor we spoke with 
was willing to participate in our study, and its characteristics may or 
may not reflect the characteristics of other private pension plans. The 
interviews we conducted with plan sponsors are solely for illustrative 
purposes and are not generalizable. 

[End of section] 

Appendix II: Comments from the Federal Retirement Thrift Investment 
Board: 

Federal Retirement Thrift Investment Board: 
1250 H Street, NW: 
Washington, DC 20005: 

June 4, 2007: 

Ms. Barbara Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

This is in response to your email of May 24, 2007, transmitting, for 
our comment, the Government Accountability Office (GAO) draft report 
entitled "Federal Retirement Thrift Investment Board: Many 
Responsibilities and Investment Policies Set by Congress". The report 
is dated June 21, 2007, and will be issued to the Ranking Minority 
Member, Committee on Oversight and Government Reform, House of 
Representatives. 

We would like to express our appreciation for the GAO's considered 
review of the voluminous data and reports provided by Federal 
Retirement Thrift Investment Board (Agency). 

We note that there are no recommendations directed to the Agency in 
this report. However, attached are some technical suggestions that we 
believe may clarify parts of the discussion. 

Thank you once again for the constructive approach that the GAO took in 
conducting this review of the Thrift Savings Plan (TSP). The 
information developed as a result of your review is useful to the 
continued improvement of the TSP. 

Sincerely, 

Signed by: 

Gregory T. Long: 
Executive Director: 

Enclosure:  

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Barbara D. Bovbjerg (202) 512-7215 or bovbjergb@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, the following individuals made 
important contributions to this report: Tamara Cross, Assistant 
Director; Ramona Burton; Lara Laufer; Patrick Bernard; Matthew 
Saradjian; Roger Thomas; Rachael Valliere; Walter Vance; and Craig 
Winslow. 

FOOTNOTES 

[1] A plan fiduciary includes a person who has discretionary control or 
authority over the management or administration of a retirement plan, 
including the plan's assets. 

[2] Private and public sector employers may sponsor pension plans for 
their employees. A plan sponsor may include an employer, employee 
organization, or both. Generally, the plan sponsor has ultimate 
responsibility for the plan. 

[3] 5 U.S.C. §§ 8401-8479. 

[4] 29 U.S.C. §§ 1001-1461. 

[5] Seven private pension plans were contacted, but only one agreed to 
speak with GAO staff. 

[6] The survey was conducted by the Profit Sharing/401(k) Council of 
America (PSCA). PSCA's survey results are based on responses from 1,106 
plan sponsors that have profit-sharing plans, 401(k) plans, or a 
combination of both and represent 1 to 5,000-plus employees. The survey 
was mailed or faxed to respondents and conducted from March 2006 to May 
2006. The survey provides a snapshot as of the end of 2005. The survey 
response rate was 21 percent. PSCA is a national, nonprofit association 
of 1,200 companies and their 6 million plan participants. According to 
PSCA, it represents the interests of its members to federal policy 
makers and offers assistance with profit sharing and 401(k) plan 
design, administration, investment, compliance, and communication. 

[7] For information about FRTIB's administrative expenses see GAO, 
Federal Retirement Thrift Investment Board: Due Diligence over 
Administrative Expenses Should Continue and Be Broadened, GAO-07-541 
(Washington, D.C.: May 14, 2007). 

[8] TSP fiduciaries include the five Board members, the Executive 
Director, any person who has or exercises discretionary authority or 
control over the management or disposition of TSP assets, and anyone 
who would be considered a fiduciary under ERISA. 5 U.S.C. § 8477(a)(3). 
Under ERISA, a fiduciary is generally anyone to the extent he or she 
exercises any discretionary authority or control over plan management 
or any authority or control over the management or disposition of plan 
assets, renders investment advice respecting plan money or property for 
a fee or other compensation, or has discretionary authority or 
responsibility for plan administration. 29 U.S.C. § 1002(21)(a). 

[9] 5 U.S.C. § 8477(g)(1). 

[10] 5 U.S.C. § 8439(c). 

[11] 5 U.S.C. § 8350 and § 8350 note. 

[12] FERSA created the Federal Employees' Retirement System (FERS). As 
part of FERS, TSP is part of the current three-part retirement system 
for federal employees--Social Security benefits, the basic benefit 
plan, and TSP. OPM trains retirement counselors about each part of the 
plan. Prior to FERS, most federal employees were covered by the Civil 
Service Retirement System. 

[13] The G Fund, managed by FRTIB, is composed of short-term 
nonmarketable government securities issued exclusively for the Thrift 
Savings Fund. The remaining four funds are managed by Barclays Global 
Investors and are structured to track large index funds, which are debt 
or equity portfolios composed of bonds or stocks of a large number of 
different companies. The first of these funds, the Fixed Income Index 
Investment Fund, or F Fund, is a bond market fund primarily invested in 
the Barclays U.S. Debt Index designed to track the Lehman Brothers U.S. 
Aggregate Index. The second fund, the C Fund, is TSP's large-company 
stock fund. It is invested in the Barclays Equity Index Fund and tracks 
the Standard & Poor's 500 Index. The Small Capitalization Stock Index 
Investment Fund, or S Fund, is invested in Barclays Extended Market 
Index Fund and is managed to track the Dow Jones Wilshire 4500 
Completion Index. The I Fund is the TSP's international stock index 
fund and is invested in Barclays EAFE Index Fund (Europe, Australasia, 
and Far East) and holds shares of major companies and industries in the 
European, Australian, and Asian stock markets. 

[14] Named after section 401(k) of the Internal Revenue Code, 401(k) 
plans allow workers to save for retirement by diverting a portion of 
their pretax income into an investment account that can grow tax-free 
until withdrawn in retirement. 26 U.S.C. § 401(k). 

[15] 5 U.S.C. § 8472(b) and (c). 

[16] 5 U.S.C. § 8474. 

[17] 5 U.S.C. § 8473. 

[18] GAO, Federal Pensions: DOL Oversight and Thrift Savings Plan 
Accountability, GAO-03-400 (Washington, DC: Apr. 23, 2003). 

[19] 5 U.S.C. § 8477(g). Specifically, FERSA directs the Secretary of 
Labor to establish a program to carry out audits to determine the level 
of compliance with the act's fiduciary standards and prohibited 
transactions. The Secretary may perform the audit, contract with a 
qualified non-government organization, or may conduct the audit in 
cooperation with the Comptroller General of the United States. 
According to DOL, the department has always elected to contract with a 
reputable accounting firm. 

[20] EBSA is also responsible for enforcing provisions of ERISA, which 
governs private pension plans. 

[21] If additional funds become available, DOL officials said that the 
contract auditors can perform more audits. For example, when increased 
funding became available for fiscal year 2002 audits, DOL reviewed the 
U.S. Treasury's calculation of the interest rate for the specially 
issued Treasury securities held in the G Fund. While not all plan 
activities are addressed every year, audit officials noted that the 
audit program covers most activities over an approximately 3-year 
cycle. 

[22] In 2003, we reported that FRTIB implements approximately 95 
percent of DOL recommendations. GAO-03-400. 

[23] 5 U.S.C. App. 3, § 8G(h)(2)(B). 

[24] See GAO-03-400. 

[25] 5 U.S.C. § 8477(b) and 29 U.S.C. § 1104(a). Additional 
responsibilities of fiduciaries required by both statutes include 
diversifying plan investments and paying only reasonable plan expenses. 

[26] 5 U.S.C. § 8477(c) and 29 U.S.C. §§ 1106 and 1108. 

[27] 5 U.S.C. § 8477(a)(3). 

[28] We recently recommended benchmarking cost and performance of 
FRTIB's individual activities against other entities or standards. See 
GAO-07-541. 

[29] DOL's most recently completed audit of FRTIB's procurement and 
selection of providers was published in 2003; it found that the 
procurement practices and controls complied with FERSA's provisions 
about fiduciary responsibility and prohibited transactions and 
contained no recommendations. 

[30] The annuity vendor was not included in the quarterly financial 
reviews until April 2007. 

[31] In 2006, DOL issued its most recent audit of the TSP investment 
manager. The audit contained no recommendations and found appropriate 
investment management operations, including compliance with provisions 
about transactions prohibited by FERSA. 

[32] 29 U.S.C. § 1132. 

[33] Pub. L. No. 99-335, § 101(a), 100 Stat. 514, 582. 

[34] Pub. L. No. 100-238, § 133(a), 101 Stat. 1744, 1760-62. 

[35] Currently, TSP holds the most assets of any defined contribution 
plan in the United States. 

[36] Under ERISA and FERSA, participants can bring civil actions to, 
among other things, enjoin any fiduciary from acts or practices that 
will constitute a fiduciary breach. 

[37] These remedies are also available to DOL when taking civil action 
against private plan fiduciaries. 

[38] 29 U.S.C. § 1110. If the plan purchases fiduciary liability 
insurance, however, it must provide for recourse by the insurer against 
any breaching fiduciaries. Both ERISA and FERSA require the purchase of 
another financial instrument, fidelity bonds, which protect the plan 
against dishonest acts like fraud. 29 U.S.C. § 1112 and 5 U.S.C. § 
8478. 

[39] 5 U.S.C. § 8477(e)(4)(B) and (C).The FTCA waives sovereign 
immunity to permit parties injured by tortuous acts of the federal 
government or its employees to bring legal claims for damages. 28 
U.S.C. §§ 1346 and 2671-2680. 

[40] 31 U.S.C. § 1304. In 1987, GAO determined that the Judgment Fund 
was available to pay tort claims against FRTIB that did not involve 
losses from the TSP or the payment of benefits. 67 Comp. Gen. 142 (Dec. 
15, 1987). 

[41] That case was brought by the founding Executive Director and a 
former Board member, who also served later as Executive Director. It 
involves allegations regarding personnel changes made when new Board 
members were appointed in 2002 and has resulted as yet in only one 
reported decision, which addresses only a collateral procedural issue. 
Cavanaugh v. Saul, 233 F.R.D. 21 (D.D.C. 2005). 

[42] 5 U.S.C. § 8438. 

[43] 5 U.S.C. § 8438(f). 

[44] Thrift Savings Investment Funds Act of 1996, Pub. L. No. 104-208, 
tit. I, § 102, 110 Stat. 3009, 3009-372--3009-373. 

[45] Recently enacted ERISA requirements apply to employer stock in 
such cases. For example, all plan participants must be allowed to 
diversify out of employer stock purchased through their own elective 
deferrals and after-tax contributions. 29 U.S.C. § 1054(j). 

[46] The 49th Annual Survey of Profit Sharing and 401(k) Plans. 

[47] 29 C.F.R. § 2509.94-2. 

[48] 5 U.S.C. § 8350 and § 8350 note. Agencies generally refer to 
retirement counselors and other retirement education staff as benefits 
officers. 

[49] 29 U.S.C. § 1021. 

[50] 5 U.S.C. § 8439(c). 

[51] Pub. L. No. 108-469, § 2, 118 Stat. 3891, 3892. 

[52] 29 U.S.C. §§ 1021-1025. ERISA requires plan sponsors to provide 
summary plan descriptions to participants within 90 days of being 
covered by the plan, then every 5 or 10 years, depending on changes. 

[53] The 49th Annual Survey of Profit Sharing and 401(k) Plans. 

[54] Special fiduciary rules contained in Department of Labor 
regulations protect plan fiduciaries from liability for individuals' 
investment decisions with respect to plans that provide participant- 
directed investments. These special fiduciary rules for plans with 
participant-directed investments are set forth pursuant to section 
404(c) of the Employee Retirement Income Security Act. There are 
certain requirements that must be satisfied in order for these special 
rules to apply to plans that provide for participant-directed 
investments. Among other requirements, plans must offer participants at 
least three investment options and information about and investment 
instructions with respect to each of the investment options, and allow 
participants to exercise independent control over their investments. 

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