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Thread: Calculating Admin expenses

  1. #1

    Default Calculating Admin expenses

    I don't know where else to put this. This is a copy of the message I posted in the Military TSP thread, but I thought it might be of interest to those of us who are writing programs and what not. Not that we can actually know what expenses are being incurred on a daily basis. Anyway, I just thought some of the fine print people would like to know. It's how they calculate the share prices for the TSP on a daily basis. The interesting thing is that administrative expenses are daily (of course). I wonder if admin expenses could be some of the culprits behind the unexplainable -FVs??

    Here you go:

    It's laid out in the Code of Federal Regulations, Title 5, Chapter VI, Section 1645 - Calculation of Share Prices:

    Sec. 1645.3 Calculation of total net earnings for each TSP Fund.
    (a)Each business day, net earnings will be calculated separately
    for each TSP Fund.
    (b) Net earnings for each fund will equal:
    (2) Minus the accrued administrative expenses of the fund,
    determined in accordance with Sec. 1645.4.
    (c) ... The total net earnings will be used to calculate the share price for that business day.
    Sec. 1645.4 Administrative expenses attributable to each TSP Fund.

    A portion of the administrative expenses accrued during each
    business day
    will be charged to each TSP Fund.
    Sec. 1645.5 Calculation of share prices.

    (a) Calculation of share price. The share price for each TSP Fund
    for each business day will apply to all sources of contributions for
    that fund. The total net earnings (as computed under Sec. 1645.3) for
    each fund will be divided by the total fund basis (as computed under
    Sec. 1645.6) for that fund. The resulting number, computed to ten
    decimal places
    , represents the incremental change in the value of that
    fund from the last business day to the current business day. The share
    price for that fund for the current business day is the sum of the
    incremental change in the share price for the current business day
    plus the share price for the prior business day, truncated to two
    decimal places.

  3. #2

    Default Re: Calculating Admin expenses

    Thanks, Verry interesting. Could explain why some of my TSP spreadsheet calculations are off a few cents. Need to move the ratios out to 10 decimal places and see if that helps. Thanks again!

  5. #3

    Join Date
    Jul 2008
    Washington, DC

    Default Re: Calculating Admin expenses

    A little information about that unknown quantity (Administrative Expenses) in the equation above.

    From the TSP website

    Do I pay administrative expenses to cover TSP operating costs?
    Yes. The TSP's administrative expenses include the operating and development costs of the record keeper's computer system, the operations of the TSP, and the printing and mailing of publications and participant statements.

    Two sources of funds are used to cover the expenses of the TSP.

    The first source is forfeitures of any nonvested Agency Automatic (1%) Contributions.
    These contributions apply to employees covered by the Federal Employees' Retirement System (FERS). If these employees leave Federal service before they are vested in the TSP, their Agency Automatic (1%) Contributions and attributable earnings on those contributions are forfeited to the TSP.

    The second source of funds is earnings on participants' accounts.
    Because forfeitures are not sufficient to pay all expenses, a portion of earnings is used to pay the balance of administrative expenses. Administrative expenses, after forfeitures, are deducted from the earnings of the G, F, C, S, and I Funds in proportion to the size of those funds. Investment management fees of the F, C, S, and I Funds are borne exclusively by the participants investing in those funds. (See "How are earnings allocated to my account?".) Information on TSP expenses is provided in the annual audited financial statements of the TSP, which are posted on this Web site each May.

    The administrative expenses associated with the L Funds are those associated with the underlying G, F, C, S, and I Funds, calculated in proportion to their allocations in each L Fund.
    The L Funds do not have any additional charges. The effect of accrued administrative expenses (after forfeitures) on the rates of return of the TSP funds is measured by the expense ratio of each investment fund.

    The expense ratio for a fund is the total of accrued administrative expenses charged to that fund during the period, divided by that fund's average balance for that period. Your share of TSP net administrative expenses is based on the size of your account balance.
    For example, the G Fund expense ratio was .03 percent in 2006. This means that in 2006, earnings in the G Fund were reduced approximately $.30 for every $1,000 of your G Fund account balance. Click for additional information about the expense ratios for the TSP funds.
    Last edited by peterson82; 11-21-2008 at 08:00 AM.



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