That was the recommendation of the General Accounting Office (GAO) in a draft report of an investigation into a dispute between the TSP and a contractor hired to build the plan a new recordkeeping system, according to a Washington Post report. Congress should “establish a formal process by which the Secretary of Labor can report to the Congress issues of critical concern associated with the actions of the TSP board and executive director,” the GAO draft report says.
The dispute prompting the GAO probe included a move by the TSP to sack its computer contractor and to sue for damages after claiming that the project was riddled with software defects. As of earlier this year, the much ballyhooed but often delayed effort to use the new system to bring daily valuation to the TSP was still up in the air (See Thrift Savings Plan Recordkeeping System Still Floundering ).
The dispute also spurred intervention by US Department of Labor (DoL) officials who said it wasn’t clear why the retirement plan paid $2 million for outside legal counsel instead of relying on US Justice Department lawyers. The DoL also said the plan should have written off $41 million in project costs and payments to the ousted contractor and charged the loss to participant accounts. For its part, the TSP has said it is still confident of getting the money back and even armed itself with a statement from outside auditors saying it wasn’t unreasonable to delay writing off the computer-project expenses.
TSP Doesn’t Have to Take DoL Suggestions
In its draft report, the GAO said the law requires the Labor Department to audit TSP operations but does not require the TSP to implement the department’s recommendations.
If the Labor Department finds that the TSP board or executive director has breached their fiduciary responsibilities, the department cannot take legal action or obtain monetary penalties, the GAO said. In contrast, the GAO pointed out, the department can take steps against private-sector pension plans and employers to correct fiduciary violations.
As a practical matter, though, disputes between the DoL and the TSP are rare. The Labor Department told the GAO that the TSP has implemented 95% of its recommendations; the TSP told the GAO it had implemented 99% of Labor’s ideas.
Still, the GAO said, the TSP board and executive director “are not held accountable” when they disagree with the Labor Department. “Consequently, DoL cannot demand that the executive director of the TSP board take specific actions within a given period of time. DoL does not report the status of its audit findings to the Congress nor is it required to do so. Such reports could provide the Congress with additional information on the management and operations of TSP,” the GAO draft report said.
The Federal Retirement Thrift Investment Board, in a response to the GAO, said it would welcome steps that enhance confidence in the Thrift Savings Plan. “The current board members have made openness and hands-on review the hallmark of our tenure,” Andrew Saul, the board’s chairman, said in a letter.
The TSP has about three million participants and fund balances valued at about $100 billion, making it one of the largest retirement savings programs in the nation.