- The Washington Times - Friday, May 16, 2003

Coming soon — maybe by mid-June — the old reliable, 1980s model federal 401(k) plan will be overhauled, upgraded, tuned up and given more horsepower.

The new bells and whistles will enable federal and military investors to make better-informed decisions, and act more quickly with their $100 billion accounts. They also will make it possible for investors with the proper computer equipment to engage in day trading — which is usually the ticket to a much smaller 401(k) account balance.

While the upgrade is long overdue (and much delayed), officials charged with running the program hope investors will use it wisely, which is not the same as using it often. They see the Thrift Savings Plan as a long-term investment vehicle that should be readjusted with care and not based on short-term tics in the markets.

Earnings and investments from TSP accounts are expected to supply 50 cents of every dollar current feds have to spend when they retire.

Congress set up the TSP with extra protections to help ease feds into the world of tax-deferred, long-term investing. At first, most of the money invested had to be put into government securities. That gave many investors a good financial base so that when restrictions were eased, then eliminated in the 1990s, the stock fund was returning 20 percent and 30 percent per year.

But many of the checks and balances — such as the long lead time required to move from one fund to another — remained long after private 401(k) plans had gone to daily valuation-transaction systems.

When the new TSP is up and running, government workers will be able to have loan requests processed much faster than today. Account balances — now expressed in dollars — also will be shown in shares in the various stock, bond and Treasury funds.

And investors who want to move from one fund to another — an exercise that now takes anywhere from two to six weeks — will be able to do it in a matter of hours. That could tempt some investors into market timing, guessing when a mutual fund has peaked or bottomed out and acting accordingly.

Buying low and selling high with any consistency is akin to regularly hitting back-to-back grand slam home runs.

Agency TSP officers have been told the transition will be in mid-June, assuming there is “continued successful progress on training and transition” to the new system. As one put it, the speedup “will make everything quicker but it is not intended for people to make changes more frequently.”

Balkanized government

Many conservatives (Republican and Democratic) want to get the government out of the business of competing with or against the private sector. The idea is to contract out any and all federal jobs and services that could be provided by contractors.

Motives for this range from cost and efficiency, to payoffs to contractors and/or hatred of the bureaucracy.

But the splintering of government operations — allowing some agencies to go their own way in everything from work rules to salaries — is likely to set up a different kind of competition: some federal agencies competing with the private sector (for pay) as well as competing against other federal agencies.

The Department of Homeland Security already is luring feds from other agencies. The Transportation Security Administration got, and continues to get, applicants from other federal agencies who like the nobler mission (and higher pay) offered by TSA.

Junkyard dogs

The Senate has proposed farming out collection of delinquent taxes to private collection agencies. The National Treasury Employees Union, with its power base in the Internal Revenue Service, isn’t wild about the idea.

Under the plan, the non-feds could keep 25 percent of what they collect, an incentive that could produce the kind of zeal the IRS was instructed not to show when Congress reformed/defanged it a couple of years ago.

NTEU says this was tried and abandoned years ago when IRS agents were pulled off collection duties to train private agents who — the union says — never got it, or the money they were supposed to collect.


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