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CountryBoy
09-04-2007, 12:01 PM
Here they go again. :mad:

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20070904/NATION06/109040043

CountryBoy

SkiUtah
09-04-2007, 12:10 PM
One solution that would work for me is to charge for trades, and then move the IFT deadline to the end of the trading day.

ebbnflow
09-04-2007, 12:18 PM
If they do start changing their policies, we could do a petition against it.

But if we can't do anything about it, then I might pull my TSP account and put it in Rydex or Direxion funds that pays 2X the I-fund and on top of that I will be able to short it too with a 2.5X return. :)

BeaverState
09-04-2007, 12:26 PM
Here they go again. :mad:

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20070904/NATION06/109040043

CountryBoy
Yet TSP themselves time the market each day when they rebalance the L-funds.

SkyPilot
09-04-2007, 12:36 PM
It would depend on the policy changes. If they allowed a couple of changes per week, then a nominal fee of a couple bucks per trade after that, then it wouldn't be so bad... Even if I ran up a bill of a couple hundred bucks a year, it would be insignificant vs the gains for the service.

However, I think they should have to demonstrate that the expense of setting up a system to track, account for, bill and audit the trades and fees would be justified (given the statisticaly few participants who do trade often). That compared to the trading costs incured by constantly rebalancing the various L funds.

The majority of Feds still just leave their money in the G fund...

On the one hand they want Feds to be more actively involved in managing their fund, on the other, they just don't want them to be too active.

And, how about the 10 million (of TSP money) they spent promoting the L funds to participants?

Might be time to organize a TSP Participant Citizen Investors Watchdog group to monitor the FRTIB!

FUTURESTRADER
09-04-2007, 12:41 PM
Here they go again. :mad:

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20070904/NATION06/109040043

CountryBoy

The article by our buddy, Causey, stirring the pot. He hates us:)

SkiUtah
09-04-2007, 12:49 PM
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SkyPilot
09-04-2007, 01:01 PM
If this is going to be a fee for service proposition, it would only be fair then to bill the L funders for constantly rebalancing their accounts (the cost of the trade, as well as the cost of the contracter who handles the management of the L funds.)

tsptalk
09-04-2007, 01:04 PM
I am not opposed to a small transaction fee if these transactions do cost the Plan money. But I also agree with BeaverState that the L-funds are more active than anything we can ever do.

SkyPilot makes some excellent points as well.

FUTURESTRADER
09-04-2007, 01:07 PM
I would imagine the L funds transactions are highly automated. I would also imagine frequent trades could be highly automated, if they're not already.

James48843
09-04-2007, 01:10 PM
I am not opposed to a small transaction fee if these transactions do cost the Plan money. But I also agree with BeaverState that the L-funds are more active than anything we can ever do.



I thought the "L" funds are rebalanced only once per month.

Am I mistaken?

ATCJeff
09-04-2007, 01:13 PM
I thought the "L" funds are rebalanced only once per month.

Am I mistaken?

From Tsp.gov

The L Funds provide you with a convenient way to diversify your account among the G, F, C, S, and I Funds, using professionally determined investment mixes that are tailored to different time horizons. Your “time horizon” is the date (after you leave Federal service) that you think you will need the money in your TSP account. Because it is important for each L Fund to maintain its target investment mix, the TSP will automatically rebalance each L Fund daily. Then, each quarter, the investments in each L Fund will shift to a slightly more conservative mix. In addition, experts will review the investment mixes periodically to be sure they are still appropriate.

FundSurfer
09-04-2007, 01:18 PM
This must have been a topic for discussion at the last board meeting. We'll get to see what they said in about a month or so. They have discussed this in the past. In the past they have looked at what the overall annual cost is and the annual cost has significantly gone down. They were actually projecting that the cost this year should also be lower.

The real budget buster is the FV. The TSP has both made a mint and lost their collective shirt this year with the FV. Back in February they had gained so much off of the FV that caught a lot of folks jumping at the wrong time that they had effectively paid for all the transactions cost for the year and had a surplus. Then in May it went back the other way as a bunch of folks got a big benefit from the FV that took most of those gains back.

The transaction cost are only big when we have a lot of big swings and people make a bunch of moves all in the same direction at the same time. Otherwise during less turbulent times our trades tend to cancel each other out as some people move into I fund are offset by others moving out. These amounts also tend to be less than the daily infow of money into the system and rejuggle of the L's. This means that their transaction cost are offset by just changing the percentages on that days buys from incomming money.

Bottom line, I wouldn't mind if they gave us say 25 trades a year and then charged us a few bucks for trades beyond that. I do however agree that any decision that is made when looking at the private sector is weighed against our limited trading deadline. The private sector is paying for that trading service and immediate execution of trades. If we don't get immediate execution then we should not have to pay the same rate. JMHO.

James48843
09-04-2007, 01:29 PM
Might be time to organize a TSP Participant Citizen Investors Watchdog group to monitor the FRTIB!

Now THERE's an idea I can support.

Perhaps we can put together a TSPTALK watchdog group, and issue our own press releases, and ask to meet with the board.

BeaverState
09-04-2007, 02:06 PM
Here they go again. :mad:

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20070904/NATION06/109040043

CountryBoy
The article says "As Bethesda-based financial planner Dennis Gurtz said, people who attempt to time the market, or guess when it has peaked and tanked, "have to be right twice: when they go out and when they return." He said being out of the market on just 10 or 12 key days can reduce the overall return for that year."

I say - Being out of the market 10 or 12 days can also increase your return for the year.

The article went on to say "In March, roughly 35,000 TSP investors moved about $1.7 billion from the stock index funds — mostly the I Fund — into the Treasury securities or bond funds."

I say - The I-fund had risen over 20 percent in the 12 months prior to March. Taking some profits would have been a conservative move at that point. Thus locking in the gains. Matter of fact, if my math is right, year to date, you'd be up around 11 percent had you switched all your money out of the I Fund and into the F fund at the end of March.

Wolverine
09-04-2007, 03:51 PM
Bottom line, I wouldn't mind if they gave us say 25 trades a year and then charged us a few bucks for trades beyond that. I do however agree that any decision that is made when looking at the private sector is weighed against our limited trading deadline. The private sector is paying for that trading service and immediate execution of trades. If we don't get immediate execution then we should not have to pay the same rate. JMHO.

I could probably go with your 25 trades a year and then a few bucks for trades beyond that the way it is set up now.

But, if we can't get immediate execution why pay at all. Give us immediate exectution and move the trading deadline to end of day.

They seem to want to push for some change with all this lately.

Just some quick thoughts here with it all.

tsptalk
09-05-2007, 09:15 AM
Fedsmith.com is looking for your opinions on this subject. Some of you have given some great comments. Want to share them with them?

Trading TSP Funds: Should There Be a Fee When Investors Trade?

http://www.fedsmith.com/articles/articles.showarticle.db.php?intArticleID=1357

ATCJeff
09-05-2007, 09:29 AM
Made my comment.

CountryBoy
09-05-2007, 09:35 AM
Thanks for the link Tom.

CB

oreo
09-05-2007, 09:45 AM
Does anyone think this will be an issue Congress will want to tackle going into an election year? Just curious.

ATCJeff
09-05-2007, 11:10 AM
Wow. Go read some of the comments!

http://www.fedsmith.com/articles/comment.viewall.db.php?startNum=0&articleID=1357

FUTURESTRADER
09-05-2007, 12:37 PM
Wow. Go read some of the comments!

http://www.fedsmith.com/articles/comment.viewall.db.php?startNum=0&articleID=1357

lol..."..better off giving your money to the milk_man" :)

SkyPilot
09-05-2007, 12:55 PM
The article says "As Bethesda-based financial planner

When was the last time a "financial planner" ever encouraged anyone to do anything but give them your money? :nuts:

BeaverState
09-05-2007, 01:30 PM
Seems to me it shouldn't cost TSP much if anything to handle our IFT's each day. Seems like it is all handled electronically anyway. Most brokers charge the same to trade 100 shares as 50,000 shares.

BeaverState
09-05-2007, 01:33 PM
When was the last time a "financial planner" ever encouraged anyone to do anything but give them your money? :nuts:
Yes, and many financial planners quote Peter Lynch as the great buy and holder. Yet, at the height of his career his portfolio turnover was around 300 percent.

Birchtree
09-05-2007, 02:18 PM
There have developed a multitude of other internet sites that are all proponents of a timing mechanism in dealing with the TSP. The regulators are possibly considering a pre-emptive strike to reign in potential growth before it explodes. They are concerned about their fiduciary responsibilities and don't feel most employees, especially if they are Donkey affiliated, are capable of managing their own retirement - that's politics. Best to keep the Elephants in power because they espouse confidence in the individual to handle their own situations.

tsptalk
09-05-2007, 03:16 PM
They are concerned about their fiduciary responsibilities and don't feel most employees, especially if they are Donkey affiliated, are capable of managing their own retirement - that's politics. Best to keep the Elephants in power because they espouse confidence in the individual to handle their own situations.
Well said.

SkyPilot
09-05-2007, 03:38 PM
Seemed that the FedSmith article was a bit slanted and biased against trading to me...

ps:
Wow, you should read the "comments" now! Lot's of people posting excellent comments and questions regarding the actual costs of trades and pointing out the daily L fund trading...

I don't think this is what FedSmith had in mind...

tsptalk
09-05-2007, 04:16 PM
Seemed that the FedSmith article was a bit slanted and biased against trading to me...
That's not surprising since the people who don't trade are thinking they are paying for the transactions of those who do. But it's interesting to hear their attitude of trading as bad, or undisciplined, wreckless, etc. They fear the unknown.

offtrack
09-05-2007, 04:36 PM
When this was brought up a few days ago, my initial thought was of who would benefit and first is obviously the managers of our assets. But beyond that I have a suspicion that this is more of a market manipulation of our assets. One of the reasons that TSP and was created was to add to market liquidity. It wouldn't do the powers that be much good if we were able to play with that liquidity. Hopefully there will be organized opposition to this plan. Otherwise, maybe there can be lobbying for more liberal in-service withdrawals to an IRA.

SkyPilot
09-05-2007, 04:41 PM
Now is the time to start calling your Senators and Representatives. I have called mine, will you call yours?

Maybe it's time for the Congressional Budget Office to audit the FTRIB for waste, fraud and abuse, and evaluate these new proposals?

Even a few hundred inquiries will cause there to be a notice, and anyone has had to respond to a Congressional Inquiry knows that this gets the attention of any agency who receives one. It's easy, just call and ask.

Your Congress person wants to make you (their constituency) feel like they have been heard.

BeaverState
09-05-2007, 10:09 PM
I've noticed a lot of people saying it would be o.k., with them if there was so many free trades per year and then a small fee for trades after that. I think TSP won't consult us about what the fees should be. What if they institute something like Fidelity has? It's free to trade out of a fund if you've owned it for six months. Otherwise it will cost you $75. And if you buy and sell funds too many times in a year they charge you $75 to buy and $75 to sell. It would be pretty painful to trade the ebbchart system when you're paying $150-$300 in fees per week.

Granted, TSP fees would probably be lower than Fidelity's. It's still a scary thought.:(

SkyPilot
09-06-2007, 04:41 AM
I don't think it can be demonstrated that there is an expense for IFTs greater than the cost of rebalancing the L funds (if there is any appreciable cost at all).

If the L fund does sustain a cost, should not the L fund participants then be charged those fees, as is being proposed for other IFTs?

Why should all TSP participants have to shoulder the burden of L fund rebalancing, (if IFTs have an actual cost) unless all participants have the continued same daily option of IFTs?

L fund participants should not be given "special class" status apart from all TSP participants.

It is my understanding that any fees charged must only be assessed to offset actual costs. I don't believe that the FTRIB is allowed to create a system that would create a positive cash flow of fees and assessments. If that is case, IFT's could likely only justify a few cents per transfer, if any at all.

FundSurfer
09-06-2007, 08:46 AM
It isn't the trading cost that are causing the problem. It is the FV! They have GUESSed poorly again and it cost them a bunch of money. I went back and looked at the minutes. They blame the I-fund. They don't say anything about S or C. The reason is that the I-fund has the FV. There should be a better way for them to solve the problem the FV is causing. They could purchase futures at COB on the next mornings open for the foriegn stock exchanges or the could move the time of day for the settle from COB to 11:00 am. At 11:00 am, they would have most markets open and only Far East closed.

The administrative cost to run TSP has been dropping by a basis point every year for the past 3 years. It isn't trading cost. The real cost is the FV.

Minnow
09-06-2007, 08:53 AM
Haven't read the minutes but are they leaning towards advocating fees for all trades or only for those "in" and "out" of the I fund?

FundSurfer
09-06-2007, 09:18 AM
We won't see the minutes for the last meeting for awhile. FedSmith probably sends a reporter to the meeting and that is where they got their info. i'm basing what I said off of the minutes for March, April, and June of 2007. They discussed the February drop and admin cost.

FundSurfer
09-06-2007, 09:24 AM
Example:
2069
If you read what they are saying, the trading cost are associated with having the overseas markets closed and having to buy the next morning. That is FV cost NOT trading cost.

Notice how far ahead they are in terms of cost for the I-fund? The made 11.8 basis points in April! They were up 3.0 basis points for the year.

Birchtree
09-06-2007, 10:31 AM
They could easily place a seven day turn around time on the I fund. That would relieve some of the pressure and reduce costs. I could live with that type of restrained round trip.

Minnow
09-06-2007, 11:23 AM
Nice post FundSurfer. I was trying to go back through all that stuff too just to get some ammo for my posts and ultimately for a letter of protest ( I guess) and you put it nicely in black and white. Thank you very much.

Now how exactly will they overcome the L fund rebalancing cost with the very minimal I fund FV costs?

BeaverState
09-06-2007, 02:24 PM
A person in the L-fund is really doing five interfund transfers a day. Seems like the L-fund is the problem.

SkyPilot
09-06-2007, 02:40 PM
How come FedSmith and Mike Causey are not asking if the L funds were really such a great idea, and surveying regarding the cost of the L funds and should they be repealed? :D

weatherweenie
09-06-2007, 02:42 PM
Here's a link to the Causey article, if anybody needs it:
http://federalnewsradio.com/index.php?sid=1238113&nid=22

SkyPilot
09-06-2007, 03:07 PM
OPERATIONS BEGIN UNDER NEW THRIFT SAVINGS PLAN RECORD KEEPING SYSTEM
Washington, D.C. (June 16, 2003) — The Federal Retirement Thrift Investment Board announced that its new daily valued Thrift Savings Plan (TSP) record keeping system went into production at noon today. Account histories for more than 3 million TSP participants have been migrated to the new database, while new contributions and loan payments made via payroll deduction since the beginning of June have been accepted, invested, and recorded in the new system. Other functions such as interfund transfers and the disbursements of loans and withdrawals will now be performed in the new environment.

The transition to the new record keeping system was the main topic at the regular monthly meeting of the Board members today, and was viewed by Chairman Andrew Saul and Executive Director Gary Amelio as both the achievement of a long-sought goal and the beginning of a new era of improved participant service. Saul congratulated the project management team led by the Board’s Director of Automated Systems Larry Stiffler, as well as the contractor team led by Materials, Communication & Computers, Inc. (MATCOM) of Alexandria, Virginia. According to Saul, “When I and the other new Board members arrived last November, we and the remaining veteran Board members carefully reviewed the situation and concluded that the staff and contractor teams were capable of completing the task. Today we have learned that our confidence was well placed.”

Amelio, who just this month began his service as Executive Director following a long career in the private sector, noted that the new system compares very favorably to what private sector plans offer to their participants.

“The daily valuation, timely processing of interfund transfers, loans, and withdrawals, and efficient Web-based functionalities available in this system rank with the best of what other plans have to offer,” Amelio stated. “When combined with the historically low TSP administrative expenses, those who voluntarily participate in the Plan will get the best of both worlds.”

SkyPilot
09-06-2007, 03:38 PM
Here's the address to write and express your concerns regarding this issue. I spoke to a staff person, and they told me there were not figures available for costs of IFT's for individuals or L funders, but if I would write them and ask for this information, they would see what they could do. They were also aware of the Causey article and the flap that was brewing.

Now is the time to write and begin to help shape the upcoming debate!

FTRIB (Federal Thrift Retirement Investment Board)
1250 H St. NW
Washington DC, 20005

BeaverState
09-06-2007, 04:21 PM
The agency I work for with roughly 40,000 employees was told by TSP that they would have to fund TSP an additonaly 27 million dollars this next fiscal year. This comes out to about $675 per employee. I not sure what was meant by this figure but I'm fairly assured it must be accurate since the comment was made by the Director of the agency when he was discussing employee costs and other budget items in a informational talk he was giving.

BeaverState
09-06-2007, 04:40 PM
The agency I work for with roughly 40,000 employees was told by TSP that they would have to fund TSP an additonaly 27 million dollars this next fiscal year. This comes out to about $675 per employee. I not sure what was meant by this figure ....
Hey I'm answering my own question. I found it on the TSP website. Here it is.....
Among civilian TSP participants, only FERS (http://www.tsp.gov/features/def_ch1-FERS-CSRS.html) employees are entitled to receive agency contributions. If you are a FERS employee, your agency makes two different types of contributions to your TSP account as part of your FERS benefits. These contributions are not taken out of your pay, nor do they increase your pay for income tax or Social Security purposes.
First, when you become eligible for agency contributions, your agency will automatically contribute to your TSP account an amount equal to 1 percent of your basic pay each pay period. These are your Agency Automatic (1%) Contributions. You will receive these contributions whether or not you contribute your own money to your TSP account.
Second, if you are contributing to your TSP account, your agency also makes Agency Matching Contributionsonce you are eligible for them. If you do not contribute your own money, you will not receive Agency Matching Contributions. Matching contributions apply to the first five percent of pay that you contribute each pay period. Your contributions are matched dollar-for-dollar on the first three percent of pay you contribute each pay period and 50 cents on the dollar for the next two percent of pay. Your agency will not match the contributions that you make above five percent of your pay. However, you will still benefit from before-tax savings and tax-deferred earnings on those contributions

SkyPilot
09-06-2007, 05:50 PM
The agency I work for with roughly 40,000 employees was told by TSP that they would have to fund TSP an additonaly 27 million dollars this next fiscal year. This comes out to about $675 per employee. I not sure what was meant by this figure but I'm fairly assured it must be accurate since the comment was made by the Director of the agency when he was discussing employee costs and other budget items in a informational talk he was giving.

That seems to run contrary to the published statements saying that the thrift was becoming less expensive to operate, not more. I think your speaker must have had bad info.

It is my understanding that TSP is not "funded" at all, but ratherer, operates on a budget comprised of percentage of TSP assets.

Fivetears
09-07-2007, 01:10 AM
If this plays out, our MB community and investment tactics will be squashed. They are going to force the L Funds down our throats. Y'all hide & watch.

KCinKC
09-28-2007, 09:14 AM
The TSP Executives are into Socialism big-time! :notrust:They think we have no brains and cannot manage our own, earned money. :(

robo
11-03-2007, 02:27 PM
More Funds are taking this position. Last year they did the same thing to my Wife's 401K. The comments below are from her account.

Beginning June 1, 2006, the Capital Accumulation Plan limits each participant to ten (10) investment fund transfers in any rolling twelve-month period. You have executed 9 investment transfer(s) within the last twelve months beginning June 1, 2006.

Only one left!





Excessive Trading Policies Target Market Timing


By Jim Durning

Your workplace retirement savings plan has a long-term objective: to help you acquire the financial resources necessary to sustain your preferred lifestyle after you stop working. While that goal can be described and pursued in many different ways, typically at its fundamental strategy emphasizes consistent, long-term savings behaviors.

The majority of those who save for retirement by investing in mutual funds through a retirement plan such as a 401(k) or 403(b) act in a manner consistent with long-term investment objectives. However, while they are definitely in the minority, other investors may engage in frequent or excessive trading - buying mutual fund shares, and then selling them quickly, even as soon as the next day - in an attempt to capitalize on short-term movements or pricing disparities in the market.

Adverse effects
Short term and other frequent trading by shareholders can adversely affect a fund's performance by disrupting the portfolio manager's investment strategy, by increasing expenses (such as trading commissions), or allowing some investors to capitalize on stale pricing at the fund's expense.

Efforts to combat market timing have increased among workplace retirement savings plans nationwide. According to a study by the Committee on Investment of Employee Benefit Assets (CIEBA), about 70% of large 401(k) plan sponsors have taken action to control market timing in their plans, and an additional 14% of plan sponsors intend to address the issue in the near future. "The survey demonstrates that sponsors of large workplace retirement savings plans have taken the issues of market timing in defined contribution (DC) plans very seriously," noted Gary Glynn, chairman of the CIEBA.

Fidelity policies
Fidelity Investments continues to enhance its systems, policies, and procedures regarding excessive trading, consistent with industry-wide efforts to ensure fairness for all mutual fund shareholders and to curb market timing. To help protect the interests of fund investors in collectively seeking long-term returns on their investments, Fidelity monitors excessive trading and limits the number of times investors move in and out of its funds, as well as other investment products offered as options in workplace retirement savings plans as directed by the fund managers or sponsors of the retirement savings plan.

Fidelity's monitoring is based upon the concept of a "roundtrip" within a fund. In retirement savings plans, a roundtrip transaction occurs when a participant exchanges in and then out of a fund option within 30 days.

For the purposes of its excessive trading policy, purchases and sales do not include systematic contributions or withdrawals (i.e., regular contributions, loan payments, hardship withdrawals) as permitted by the plan, they only include participant-initiated exchanges greater than $1,000.

Under the excessive trading policy, participants are limited to one roundtrip transaction per fund within any rolling 90-day period, subject to an overall limit of four roundtrip transactions across all funds over a rolling 12-month period.

The first roundtrip in any fund results in a warning letter. Participants with two or more roundtrip transactions in a single fund within a rolling 90-day period will be blocked from making additional purchases of the fund for 85 days. Any four roundtrips in one or more funds in a 12 month rolling period will result in the participant being limited to one exchange day per quarter for 12 months. This applies to all investments subject to the excessive trading policy. Once the 12 month exchange limitation expires, any additional roundtrip in any fund in the next 12 month period will result in another 12 month limitation of one exchange day per quarter.

Fidelity continues to reserve the right, but does not have the obligation, to reject any purchase or exchange transaction at any time, as provided for in prospectuses and other governing documents for its mutual funds and other investment products. Fidelity continues to reserve the right to amend its excessive trading rules in the future.

While the implementation of these excessive trading rules for Fidelity mutual funds begins in December 2004, application of the rules to other products may occur at later dates to be determined in the future.

Trading suspensions do not restrict a retirement plan participant's ability to make loan repayments, transact withdrawals from plan accounts, make investment exchanges out of the fund, or continue to allocate employee and employer contributions to the fund. In other words, the right to redeem is not affected by these policies, but the ability to make subsequent exchanges into the fund will be.

Continuous improvement
While Fidelity believes that the combination of fair value pricing, redemption fees (on certain funds), and account level monitoring described above is effective in limiting excessive shareholder trading activity in the Fidelity funds, the firm is always looking for ways to improve its processes. Fidelity has made a number of changes over time in developing the current procedures and Fidelity fund investors can be assured that the firm expects to make changes in the future as opportunities for improvements and new developments arise.

Fidelity serves more than 10 million people who are saving for retirement through their workplace retirement savings plans. The policies implemented to control disruptive trading are intended to protect the long-term best interest of the majority of those investors from the potential negative effects of the smaller number of investors who trade disruptively.

Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call Fidelity at 1-800-343-0860 or visit www.fidelity.com for a free prospectus. Read it carefully before you invest..

#388127

Jim Durning is editor of Connections, the Fidelity Investments magazine for employers

http://wps.fidelity.com/401k/Excessive.html