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entitled 'Federal Thrift Savings Plan: Customer Service Practices 
Adopted by Private Sector Plan Managers Should Be Considered' which was 
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Report to the Chairman, Committee on Homeland Security and Governmental 
Affairs, U.S. Senate:

United States Government Accountability Office:

GAO:

January 2005:

Federal Thrift Savings Plan:

Customer Service Practices Adopted by Private Sector Plan Managers 
Should Be Considered:

GAO-05-38:

GAO Highlights:

Highlights of GAO-05-38, a report to the Chairman, Committee on 
Homeland Security and Governmental Affairs, U.S. Senate

Why GAO Did This Study:

Intended to resemble private sector 401(k) pension plans, the federal 
governmentís Thrift Savings Plan (TSP) held more than $128 billion in 
retirement assets for over 3 million participants at the end of 2003. 
Customer service-related difficulties during the Federal Retirement 
Thrift Investment Board Ďs (TSPís governing body) record-keeping system 
conversion in 2003 led the Chairman of a Senate Committee to ask GAO to 
examine the customer service provided to TSP participants. This review 
describes (1) customer service provisions within TSP and those offered 
by private sector managers and (2) customer service practices used by 
private sector plan managers that could be considered for use in TSP.

What GAO Found:

TSP managers and private managers (servicing multiple pension plans) 
enable participants to select their preferred means of customer service 
from a similar range of options--such as telephone, Web sites, and on-
site representatives--but each emphasizes different approaches. Both 
TSP and private plan managers provide customer service through 
automated telephone assistance as well as live representatives located 
at call centers. Both TSP and private managers also use standards to 
measure the efficiency and effectiveness of their call centers. 
However, TSP managers emphasize the efficiency of call centers based on 
quantifiable standards, such as the time it takes to respond to 
incoming calls, while private plan managers place a greater emphasis on 
the policy of satisfying each customerís needs in one call. Both TSP 
and private sector plan managers also use Web sites to deliver plan 
information and allow participants to conduct personal transactions, 
and private plan managers emphasize the use of their Web sites as the 
primary vehicles for delivering retirement education and information to 
participants. Finally, while TSP managers said that agency 
representatives serve as the initial contact points for TSP employees 
to learn about TSP and receive counseling, private plan managers use on-
site representatives less to supplement services provided by call 
center representatives and Web-based resources.

Private sector plan managers we contacted have adopted various other 
practices that are not featured within TSP, such as regularly assessing 
customer satisfaction and using regularly updated technology to improve 
customer service. These managers gather participant feedback on their 
voice response system via short, automated surveys at the end of 
participantsí calls and use short, on-the-spot surveys to gather 
information on participantsí experience with their Web site. These plan 
managers emphasized the importance of incorporating participant 
feedback into their customer service delivery model in order to better 
meet the needs of their participants. Although TSP managers have 
surveyed participants in the past, they do not have a systematic 
approach to assess whether their customer service meets participantsí 
needs. TSP managers rely largely on indirect feedback from customer 
service staff, agency coordinators, and others who respond to 
complaints or requests for assistance from participants. The privately 
managed plans we studied also appear to utilize more up-to-date 
technologies to provide customer service, such as allowing participants 
to create account statements for any period of time or offering 
seminars over the Web on different plan topics that participants can 
access anytime. The TSP Web site provides fewer options and relies more 
on basic features.

What GAO Recommends:

GAO recommended that the Board (1) develop a systematic effort to 
assess TSP participantsí overall satisfaction with the services 
provided and (2) institutionalize the routine collection of information 
and systematic assessment of industry trends and innovations. The Board 
disagreed with our recommendations because it had stated its intentions 
to conduct a participant survey and has visited several large private 
plan managers. However, we continue to believe that ongoing efforts to 
assess customer satisfaction and practices used in the customer service 
industry should be institutionalized as a regular aspect of TSPís 
operations.

www.gao.gov/cgi-bin/getrpt?GAO-05-38.

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:

TSP and Private Sector Plan Managers Provide a Similar Range of 
Customer Service Options but Emphasize Different Approaches:

Private Sector Plan Managers Have Adopted Various Practices That TSP 
Managers Could Consider to Improve Customer Service:

Conclusions:

Recommendations for Executive Action:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

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

Figure:

Figure 1: Plan Service Provision Options:

Abbreviations:

ETAC: Employee Thrift Advisory Council:

FERSA: Federal Employees' Retirement System Act:

NFC: National Finance Center:

OPM: Office of Personnel Management:

PSR: Participant Service Representative:

TSP: Thrift Savings Plan:

United States Government Accountability Office:

Washington, DC 20548:

January 18, 2005:

The Honorable Susan M. Collins: 
Chairman: 
Committee on Homeland Security and Governmental Affairs: 
U. S. Senate:

Dear Chairman Collins:

Since its inception in 1986, the federal government's Thrift Savings 
Plan (TSP) has become a central component of federal employees' 
retirement savings. Intended to resemble private sector 401(k) pension 
plans, TSP held more than $128 billion in retirement assets for about 
3.2 million participants and has become one of the largest retirement 
plans in the United States.[Footnote 1] TSP resembles private sector 
401(k) pension plans in that both allow employees to contribute a 
portion of their current compensation through payroll salary deductions 
and invest their account balances among a menu of investment options 
selected by the employer.[Footnote 2] Under pressure to provide plan 
features and customer service that are more consistent with those of 
large private sector plan managers,[Footnote 3] in 2003 TSP managers 
launched a new record-keeping system designed to allow improved service 
to plan participants.[Footnote 4] After experiencing problems with 
system access, customer assistance, and transaction processing during 
implementation of this new system, TSP managers have reported that the 
plan now processes more transactions more efficiently and with more 
participant control than in the past.[Footnote 5] However, the 
difficulties of implementing the new record-keeping system and the 
problems that ensued led plan participants and members of Congress to 
raise questions about the overall level of customer service at TSP. In 
light of these questions, the Chairman of the Senate Committee on 
Homeland Security and Governmental Affairs asked GAO to examine the 
customer service provided to TSP participants. This review describes 
(1) customer service provisions within TSP and those offered by private 
sector managers and (2) customer service practices used by private 
sector plan managers that could be used to improve TSP's service.

To describe customer service in TSP, we interviewed officials from TSP 
and the National Finance Center (NFC), reviewed documentation governing 
TSP's customer service operations, and observed TSP operations. 
[Footnote 6] To describe how private sector plan managers provide 
customer service and identify practices that might prove useful to TSP, 
we interviewed five managers of plans representing an average of 4.9 
million participants and an average of $169.8 billion in plan 
assets,[Footnote 7] observed the managers' customer service operations, 
and obtained documentation of their operations where possible.[Footnote 
8] We conducted our work between December 2003 and December 2004 in 
accordance with generally accepted government auditing standards. 
Appendix I describes the scope and methodology of our work in greater 
detail.

Results in Brief:

TSP and private sector plan managers enable participants to select 
their preferred means of customer service from a similar range of 
options--such as telephone, Web sites, and on-site representatives--but 
each emphasizes different approaches. Both TSP and private plan 
managers use the telephone to provide customer service through 
automated telephone assistance as well as live representatives located 
at call centers. TSP and private plan managers also both use standards 
to measure the efficiency and effectiveness of their call centers. 
However, TSP managers emphasize the efficiency of call centers based on 
quantifiable standards, such as the time it takes to respond to 
incoming calls, while private plan managers place a greater emphasis on 
the policy of satisfying each customer's needs in one call. Both TSP 
and private sector plan managers also use Web sites to deliver plan 
information and allow participants to conduct personal transactions, 
and private plan managers emphasize the use of their Web sites as the 
primary vehicles for delivering retirement education and information to 
participants.[Footnote 9] Finally, while both TSP and private sector 
plan managers use on-site coordinators to provide plan information, 
this customer service function is more heavily emphasized in TSP. TSP 
managers said that agency representatives serve as the initial contact 
points for actively employed TSP participants to learn about TSP and 
receive counseling. Private sector plan managers use on-site 
representatives less and do so to supplement services provided by call 
center representatives and Web-based resources.

Private sector plan managers we contacted have adopted various other 
practices that are not featured within TSP, such as regularly assessing 
customer satisfaction and using regularly updated technology to improve 
customer service. These managers gather participant feedback on their 
voice response systems via short, automated surveys at the end of 
participants' calls and provide links on their Web sites to gather 
information on participants' experience with their Web site. These plan 
managers emphasized the importance of incorporating participant 
feedback into their customer service delivery models in order to better 
meet the needs of their participants. Although TSP managers have 
surveyed participants, they have not done so since the early 1990s and 
do not have a systematic approach to assess whether their customer 
service meets participants' needs. TSP managers rely largely on 
indirect feedback from NFC and TSP staff and others who respond to 
complaints or requests for assistance from participants, such as agency 
coordinators. The privately managed plans we studied also appear to 
utilize more up-to-date technologies to provide customer service, such 
as allowing participants to create account statements for any period of 
time or offering seminars over the Web on different plan topics that 
participants can access anytime. The TSP Web site provides fewer 
options and relies more on basic features.

This report contains recommendations to the Federal Retirement Thrift 
Investment Board (the Board) concerning actions needed to identify 
potential areas of improvement in the customer service provided to TSP 
participants by developing and implementing an evaluation effort to 
assess the level of customer satisfaction and routinely surveying the 
largest private sector plan managers to keep up with current industry 
trends. We recommended that the Board (1) develop a systematic 
evaluation effort, including broad survey methods that are supplemented 
by other efforts to randomly survey TSP participants, to assess their 
overall level of satisfaction with the services provided and (2) 
institutionalize the routine collection of information to regularly and 
systematically assess trends and innovations in the defined 
contribution industry. The Board disagreed with our first 
recommendation because it had previously announced its intention to 
survey TSP participants on a variety of topics, including client 
satisfaction. However, in its February 2004 monthly meeting, the Board 
said that such a survey would not be conducted for at least another 2 
years. As we state in this report, the private sector plan managers 
that we spoke with believe that direct, ongoing participant feedback is 
needed to respond to the changing needs of plan participants. Without 
obtaining more frequent feedback from participants, TSP managers cannot 
determine what improvements would best satisfy participants' needs. 
Therefore, we continue to believe that the Board needs to develop and 
implement an ongoing evaluation effort that includes different types of 
surveys to systematically assess the level of customer satisfaction. 
The Board also disagreed with our second recommendation because it has 
conducted and will continue to conduct on-site reviews of the largest 
private plan managers to determine the services they provide and the 
technological capabilities they plan for the future. While the Board's 
recent visits to such plan managers are a positive step, we continue to 
believe that a routine and systematic effort to collect information on 
the practices used in the private sector customer service industry and 
assess their potential for use in TSP should be institutionalized as a 
regular aspect of TSP's operations.

Background:

The Federal Employees' Retirement System Act of 1986 (FERSA)[Footnote 
10] created the Thrift Savings Plan as one of the basic elements of a 
new retirement system for federal workers to, among other purposes, 
provide options for retirement planning and encourage personal 
retirement savings among the federal workforce.[Footnote 11] Most 
federal workers are allowed to participate in TSP, which is available 
to federal and postal employees, members of Congress and congressional 
employees, members of the uniformed services, and members of the 
judicial branch. Eligibility depends upon coverage under the Federal 
Employees' Retirement System or the Civil Service Retirement System and 
civilian or military status.[Footnote 12]

Eligible federal employees are able to contribute up to a fixed 
percentage of their annual base pay or a flat amount subject to IRS 
limits. Additionally, certain participants are eligible for automatic 1 
percent contributions and limited matching contributions from the 
employing federal agency. TSP provides federal (and in certain cases, 
state) income tax deferral on employee contributions and their related 
earnings, similar to those offered by many private sector 401(k)-type 
pension plans.[Footnote 13] As with a 401(k) plan, participants are 
able to contribute a portion of their basic salary into an individual 
tax-deferred account. Participants have the ability to 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 independent agency in the executive branch 
established by Congress under FERSA. This five-member, presidentially 
appointed Board's primary responsibilities include establishing 
policies for the investment and management of TSP. In addition, the 
Board must manage the Thrift Savings Fund solely in the interest of the 
participants and beneficiaries of TSP, as well as create administrative 
policies for the TSP. In addition to assigning these broad duties, 
FERSA also charges the Board with appointing an Executive Director and 
an Employee Thrift Advisory Council (ETAC).[Footnote 14] The Executive 
Director and staff 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 Employee Thrift 
Advisory Council advises the Board and Executive Director on matters 
relating to the investment and administration of TSP.[Footnote 15]

While the Executive Director has responsibility for establishing and 
maintaining TSP participant accounts, these account record-keeping 
services are currently performed primarily by the U.S. Department of 
Agriculture's National Finance Center under a contractual agreement 
with the Board. Through this agreement, the TSP service office of NFC 
is responsible for updating participants' accounts based on data 
provided by agency payroll offices, processing participant account 
transactions, and providing customer service support related to these 
functions.

Federal agency payroll and personnel offices also play a role in the 
administration and customer service activities of TSP. These offices 
are responsible for helping new employees enroll in TSP when they are 
hired and assisting existing employees make changes during designated 
semiannual seasons called open enrollment periods. They also retain 
control of administrative functions affecting employee payroll 
deductions, such as the election and alteration of contribution 
percentages. Additionally, FERSA requires TSP to provide information to 
employees participating in TSP and requires the Office of Personnel 
Management to establish a training program for all retirement 
counselors of federal agencies.[Footnote 16]

TSP and Private Sector Plan Managers Provide a Similar Range of 
Customer Service Options but Emphasize Different Approaches:

Though they emphasize different approaches, TSP and private sector plan 
managers enable customers to select their preferred means of service 
from a similar range of service options--including telephone, Internet, 
and on-site assistance (fig. 1). Both TSP and private plan managers 
give customers the option of obtaining assistance through automated 
telephone systems as well as live representatives located at call 
centers, although they emphasize different standards when evaluating 
the assistance provided. In addition, both TSP and private managers 
provide Web sites that deliver plan information and allow participants 
to conduct personal transactions, but private plan managers emphasize 
the use of their Web sites as the primary vehicles for delivering 
retirement education and information to participants. Finally, while 
both TSP and private managers use on-site coordinators to provide plan 
information, this customer service function is more heavily used by 
TSP. Whereas TSP managers said that agency representatives serve as the 
initial contact points for actively employed TSP participants to learn 
about TSP, private managers use on-site representatives less and do so 
to supplement call center representatives and Web-based resources.

Figure 1: Plan Service Provision Options:

[See PDF for image]

[A] Only actively employed Thrift Savings Plan participants have access 
to on-site agency representatives. Also, not all private plan managers 
offer on-site representatives.

[End of figure]

Call Centers Are Used to Provide Customer Service by Both TSP and 
Private Sector Plan Managers:

TSP managers provide an automated, toll-free telephone system and call 
center staff that help answer participants' questions, and TSP managers 
measure the efficiency of the call centers based on quantifiable 
standards, such as the time it takes to respond to incoming calls. 
TSP's automated telephone system, known as the ThriftLine and operated 
by the National Finance Center, allows participants to access general 
plan information, including share prices, rates of return, current loan 
interest rates, current annuity interest rates, and plan news.[Footnote 
17] In addition to obtaining general plan information, participants can 
gain access to the ThriftLine system to get personal account 
information, such as their account balance and how they are allocating 
their contributions, or to manage their account, such as by making 
interfund transfers or withdrawals. Participants can also use the 
ThriftLine system to reach a TSP call center representative.

TSP managers also maintain a call center where participants can reach 
service representatives; these representatives answer participants' 
questions and can also help them make changes to their accounts. About 
155 call center representatives field incoming telephone calls and 
answer participants' questions about loans, allocation changes, 
interfund transfers, and withdrawals.[Footnote 18] In addition to 
answering participants' questions, these call center staff also 
register requests for assistance and complaints in a record-keeping 
system, which allows supervisors or lead analysts to review such 
comments and respond to participants to help them resolve problems. 
Call center staff said participants most commonly call to ask questions 
about loans or withdrawals. The staff also indicated that in the past 
participants with loans were more likely than others to call back 
seeking more help.

Recently, the Board has taken a number of steps to improve telephone 
service to TSP participants. These included establishing an additional 
call center to reduce service interruptions and providing toll-free 
telephone service to facilitate participant access to service 
representatives. The new call center, located in Cumberland, Maryland, 
opened in July 2004 to complement the center located in New Orleans, 
Louisiana, during normal operations and provide backup during weather- 
related or other local events that could otherwise interrupt service. 
Also in July 2004, the Board began providing toll-free telephone 
service to TSP participants where participants will be able to obtain 
TSP account or transaction information via the automated telephone 
service 24 hours a day, 7 days a week.

TSP managers emphasized the efficiency of call centers based on 
quantifiable standards--such as the percentage of calls that are 
answered within a specified time frame--and pointed to their 
performance on these measures as evidence of call center productivity. 
For example, the TSP call center tries to answer at least 90 percent of 
calls within 20 seconds of a participant calling. TSP was meeting this 
standard in 2003 prior to the implementation of the new record-keeping 
system and has since begun meeting it again.[Footnote 19] However, TSP 
failed to meet this standard for about a 10-month period (May of 2003 
through February 2004), when it was experiencing an increase in the 
volume of calls received prompted by the implementation of the new 
record-keeping system. Finally, TSP also closely monitors the 
percentage of callers who hang up before receiving service (known as 
the call abandonment rate) and the average call length as a measure of 
service, and each call center representative is required to help an 
average of at least 50 participants per day.[Footnote 20] TSP managers 
said that resolving the participant's concern on the first call is also 
a goal, and they have enlisted the help of a private sector contractor 
to make changes to improve the quality of their call center processes 
and are developing new standards for call center representatives.

Private sector plan managers also provide caller assistance through 
automated toll-free telephone systems and live service representatives. 
Some of these managers have more than one defined contribution plan 
under their management and provide unique toll-free numbers for each 
plan. Participants complete a log-in process that routes them to an 
automated menu unique to their particular plan--a system similar to 
that provided by the ThriftLine. From this menu, participants can then 
check their account balances, get price quotes, receive plan 
information, and process account transactions. These automated customer 
service lines also give participants the option of speaking to a live 
call center representative who can provide assistance with transactions 
or answer their questions. In addition to providing basic assistance, 
service representatives use the call as an opportunity to direct 
participants to educational and plan materials available on their Web 
site.

While private managers used similar means as TSP to provide caller 
assistance, they emphasized different types of standards than TSP when 
evaluating the success of their call centers. Private managers told us 
that they downplayed the importance of quantitative measures and 
instead focused on ensuring that service representatives fully 
satisfied each customer's needs efficiently and politely in one call. 
Specifically, private sector managers emphasized this policy of first- 
call resolution as an overriding goal and said they viewed quantitative 
measures, such as those emphasized by TSP, as secondary or, in some 
cases, an inaccurate measure of call center performance. For example, 
while TSP keeps close watch on the call abandonment rate, private 
managers we spoke with placed little emphasis on this measure. In fact, 
one plan manager told us he believed the call abandonment rate to be an 
inaccurate measure of productivity, as some participants terminate 
calls after opting to visit the Web site in response to the telephone 
recording they hear while on hold. Furthermore, unlike TSP managers, 
who evaluate service representative utilization by representatives' 
ability to answer a minimum number of calls each shift, private 
managers we spoke with did not have required call minimums, instead 
stressing that service representatives should fully resolve each 
participant's needs, regardless of the time required. Finally, although 
private managers had requirements--such as answering 90 percent of 
calls within 20 seconds--specified in the contracts with their clients, 
they did not use such measures as the primary standard for evaluating 
service representatives or call center effectiveness.However, we did 
not attempt to assess the possible impact of these differences on the 
quality of customer service.

Web Sites Are Provided by Both TSP and Private Plans, but Private Plan 
Managers Tend to Use Them for Broader Purposes:

TSP managers also provide customer service through their Web-based 
transaction system. TSP's Web site is maintained and operated by TSP 
staff and according to TSP managers has received an average of about 
15.7 million hits per month and processed an average of 216,696 
transactions per month during the first 8 months of 2004. Participants 
can use the Web site for functions such as accessing plan information, 
making loan requests, downloading forms, transferring funds, changing 
allocations between funds, and accessing account balances, among other 
things. Participants can also conduct many of these transactions over 
the phone, but by using the Web site, participants can also make a loan 
request and can submit the form online for quicker processing.

According to TSP managers, the Web site has to a great extent replaced 
paper forms for processing transactions and providing information. For 
example, 93 percent of interfund transfers were conducted through the 
Web site during the first 8 months of 2004. TSP managers also said that 
they have eliminated paper versions of forms, statements, and bulletins 
that have traditionally been provided through the mail or sent to 
agency coordinators because most of these documents can be obtained 
through the Web site. TSP managers stated that their goal in doing so 
is to improve their level of service while decreasing costs.[Footnote 
21]

Private sector plan managers that we spoke with said that in addition 
to providing a means for participants to process transactions, they 
also intend their Web sites to be the primary vehicles for delivering 
retirement education and information to their participants. Like TSP 
managers, private managers said they allow participants to conduct 
different transactions, check account balances, and receive plan 
information electronically. One plan manager that we spoke with said 
that his Web site processed approximately 9 million transactions per 
month in 2003.

In addition, we found that private sector Web sites provided a range of 
resources for participants, from Web-broadcast seminars to downloadable 
brochures and general investment information, and most private plan 
managers underscored the importance of the Web site as a tool that 
allows participants to access information on their own. One manager 
told us that his goal is not only to educate participants but also to 
influence participant behavior by strategically placing educational 
information on the Web site so as to link such educational materials to 
the topic or transaction a participant is pursuing. For example, the 
plan manager said that research has found that most participants 
visited the site for information on their account balance or personal 
rate of return, not to seek out educational materials. In response to 
findings about participant Web usage, the plan manager redesigned the 
site so that educational materials are embedded in relevant pages of 
the site, rather than isolated on a separate page. In contrast, TSP 
separates all plan and retirement information from account and 
transaction access.

Agency Coordinators Serve as the Front Line of Customer Service 
Operations for TSP, but Managers of Similar Private Sector Plans Rely 
on Such On-site Representatives Less Frequently:

Designated by their federal agencies as liaisons with TSP managers, 
agency coordinators provide customer service to participants within 
their particular agencies. Agency coordinators, who are typically 
located in their agencies' personnel or benefits offices, are the 
primary contacts for actively employed TSP participants. Generally, 
agency coordinators are expected to inform eligible employees of TSP 
options and benefits; maintain supplies of TSP forms and informational 
materials; collect, process, and submit TSP election forms to agency 
payroll offices; and respond to inquiries from active 
employees.[Footnote 22] For some agencies, the coordinator's 
responsibilities are combined with those of the agency retirement 
counselor.[Footnote 23] FERSA authorizes agencies to designate 
retirement counselors who are responsible for providing employees with 
benefits information and mandates that OPM establish a training program 
for these retirement counselors.[Footnote 24] Agencies, however, have 
primary responsibility for designing and implementing their programs 
according to agency-specific needs.

TSP managers said that the coordinators are the front line of TSP's 
customer service operations. However, they also said that they lack the 
authority to monitor how frequently, at what point, and for what 
purpose coordinators contact participants. TSP managers view their role 
in providing customer service through agency coordinators as limited 
primarily to assisting these coordinators by distributing information 
and answering questions as they perform their TSP-related duties. The 
agency coordinators we spoke with said they were responsible for 
providing information on TSP to new employees, providing employees 
information on open season enrollment, conducting retirement seminars, 
helping with payroll issues, and answering any questions that employees 
may have about TSP.

We found that the information and assistance provided to employees by 
coordinators in different agencies varied. For example, when we spoke 
with nine agency coordinators from large and small agencies, three 
coordinators told us that they had requested TSP staff to conduct 
seminars at their agencies to provide information on TSP and retirement 
planning. Of the six other coordinators that we spoke with, all but one 
said they conducted their own seminars or used an outside contractor. 
The agency coordinators said they also distribute information 
electronically or through posted bulletins, informational meetings, 
orientation sessions, and fliers in office mail. Several coordinators 
indicated that they refer participants to the TSP Web site or the 
ThriftLine to obtain plan information or to conduct transactions. The 
coordinators themselves receive guidance and new information on TSP 
from TSP managers by attending optional quarterly meetings and 
coordinator training sessions that are offered monthly and reading TSP 
bulletins--monthly publications that provide recent information on the 
TSP and are available to agency coordinators through the TSP Web site 
and the mail. The agency coordinators we spoke with indicated that they 
had other responsibilities in addition to their TSP-related duties.

Private sector plan managers rely on on-site representatives less and 
tend to deliver educational and transaction resources directly to 
participants. As a result, plan managers view call center 
representatives, automated telephone services, and Web sites as their 
front line of customer service operations. This emphasis on self- 
service results in these managers providing all available plan 
information and retirement education through one or more of these 
service delivery methods and using on-site representatives only as a 
backup measure or not at all. Private sector companies have been moving 
away from face-to-face service delivery approaches and toward live 
telephone assistance to meet consumers' expectations for fast and 
convenient service and to provide this service more cost-effectively.

Additionally, by allowing participants to conduct all transactions-- 
including making changes to contribution percentages--through the Web 
site or telephone services, plan managers also rely less on employers 
to provide services. One plan manager we spoke with described the use 
of on-site representatives as flawed, because information provided by 
different on-site representatives may vary. By providing all 
information through a Web site or centralized contact center, the 
manager told us, the plan could ensure consistency of service. Despite 
this, some plan managers we spoke with did use on-site representatives 
in a limited capacity. One plan manager provided limited on-site 
support for its state government and school district clients, but the 
arrangement was specific to the plan sponsor and the plan manager did 
not have a companywide practice for utilizing such representatives. 
Specifically, the number, location, and function of representatives 
provided to a client varied from plan sponsor to plan sponsor. For its 
state government and school district clients, the plan manager only 
provided on-site service when the plan sponsor specifically requested a 
representative or during specified times, such as open enrollment 
periods.

Private Sector Plan Managers Have Adopted Various Practices That TSP 
Managers Could Consider to Improve Customer Service:

Private sector plan managers we contacted have adopted various other 
practices that are not featured within TSP, such as regularly assessing 
customer satisfaction and using regularly updated technology to improve 
customer service. Private managers frequently assess their performance 
by gathering participant feedback on the services provided and use this 
information to improve their customer service delivery. Although TSP 
managers have surveyed participants, they have not done so since the 
early 1990s and currently have no systematic approach to assess whether 
the plans customer service meets participants' needs. In addition, 
private managers that we spoke with appear to utilize more up-to-date 
technologies to provide customer service than do TSP managers.

Private Sector Plan Managers Frequently Assess Their Performance by 
Gathering Participant Feedback on the Services Provided:

Private sector plan managers regularly gather participant feedback and 
use the feedback received to improve their customer service. Since most 
private plan managers deliver customer service through multiple 
methods, they use a number of mechanisms to gather participant 
feedback. These mechanisms are customized to gather information 
specific to the service method the participant used. For example, some 
plan managers we spoke with provide a link on their Web site to a 
survey that allows participants to share their impressions of and 
experiences with the service provided through the site. Some managers 
also use short on-the-spot surveys to gather feedback about a 
participant's experience on the plan manager's Web site.[Footnote 25]

These plan managers also survey participants after they have interacted 
with the plan's contact center and voice response telephone system 
through short, automated surveys at the end of a call. Managing 
officials told us that these surveys include questions regarding the 
service method's ease of use, whether or not the participant was able 
to complete the intended transaction, and sometimes ask whether the 
participant has suggestions as to how the service method or transaction 
process could be improved. Traditional survey methods are also used, 
such as an annual mail or telephone survey to randomly sample 
participants and assess their overall level of satisfaction with the 
services provided. However, plan managers said that these surveys take 
longer and are more costly to administer than other methods.

All of the plan managers we spoke with emphasized the importance of 
incorporating participant feedback into their customer service delivery 
models in order to better meet the needs of their participants. They 
told us that it is important to determine what is working and what is 
not by regularly gathering participant feedback. For example, one plan 
manager told us that his plan had been mailing participant statements 
to the employer for distribution for several years. He thought that 
this method of distribution would be more convenient and cost-effective 
for the plan and that since no participants were complaining, it must 
be working efficiently. However, when participants were surveyed, they 
made it known that the statements were usually not distributed by their 
employer in a timely manner, if at all, and as a result, statements are 
now mailed directly to participants. Another plan manager said that his 
plan had redesigned its entire Web site and added features based 
primarily on feedback from their participants.

TSP managers said that they have not surveyed participants since the 
early 1990s because they were waiting for a new record-keeping system 
to be developed, and they said it would not have made sense to survey 
participants until after the transition issues were resolved and 
participants had some experience under the new system. Rather than 
survey participants shortly after the new system was implemented, in 
2003, TSP managers have since decided to wait until a new investment 
option is added to the existing selection of five funds. The Board 
anticipates implementing the new option in mid-2005. Although the Board 
has a system for addressing participant complaints, TSP has no 
systematic mechanism in place for soliciting participant views about 
the quality of the service they are receiving. Instead, TSP managers 
rely largely on indirect feedback from NFC and TSP staff and others, 
such as agency coordinators, who respond to complaints or requests for 
assistance from participants. Agency coordinators and the call center 
representatives at NFC provide some feedback to TSP managers regarding 
areas of potential improvement. TSP managers are also responsible for 
gathering participant feedback through the Employee Thrift Advisory 
Council, as required by FERSA. However, while some ETAC representatives 
provide TSP managers with feedback on draft TSP publications, 
legislative initiatives, and other issues, ETAC representatives do not 
systemically solicit feedback from their constituents. Some ETAC 
representatives may receive sporadic feedback from participants, but 
ETAC does not conduct surveys of plan participants. As a result, TSP 
managers are dependent on call center representatives or agency 
coordinators to forward any feedback they receive from participants. 
Also, the executive director of ETAC said that TSP participants might 
be more likely to raise customer service issues with their local 
representatives, such as union representatives, rather than elevate 
issues to the national level. Therefore, the extent to which 
participants within the represented agencies and employee organizations 
provide feedback to their ETAC representative is unclear.

Because TSP relies on customer complaints as an indicator of 
participant satisfaction, its managers do not have the information 
necessary to determine the degree to which participants are satisfied 
with the services. A TSP official said that because participant 
complaints have decreased significantly and leveled off since the 
record-keeping system conversion in June 2003, participants are 
probably satisfied with the services that TSP is providing. However, 
TSP managers' reliance on complaints does not take into account 
participants who are dissatisfied and have not complained or do not 
know where to complain about the services they received. In other 
instances, participants have to send letters to TSP managers or the TSP 
call center, or contact their member of Congress with problems or 
concerns they have had with the services they received.

Privately Managed Plans Use More Up-to-date Technology in Delivering 
Customer Service than TSP Does:

Private sector plan managers that we spoke with also utilize more up- 
to-date technologies to improve customer service than TSP does. We 
found that the privately managed plans' Web sites provided participants 
more flexibility and options for managing and learning about their 
retirement accounts than did the TSP Web site. Private plan managers 
also told us that one part of providing the best possible customer 
service is allowing participants to serve themselves in an easy and 
convenient manner, and they have found that the more up-to-date 
technology that they have incorporated into their customer service 
delivery models helps facilitate participant self-service. For example, 
one plan manager's Web site allowed participants to instantly create 
and print account statements for any period of time. This allows 
participants to easily determine how much they earned, lost, or 
contributed for any given period of time. Plan managers said that such 
information helps participants make decisions about how to allocate 
their funds and about retirement planning. Conversely, the TSP Web site 
only makes statements available for calendar year quarters, and the 
participant must wait approximately 2 weeks after the close of the 
quarter to obtain the statement.

Privately managed plans also use their Web sites to help participants 
understand their retirement plan and the options available to them 
within the plan. For example, one plan manager we spoke with provided 
access to prerecorded seminars on the Web sites that cover current 
account-related topics and features. Participants may view these 
seminars at any time as an alternative to the printed literature that 
was also available through the Web site if desired. Conversely, the TSP 
Web site only offers print copies of its general plan information 
brochure, available in hard copy or for viewing online, and the 
brochure on general plan information has not been updated since mid- 
2001.

The private plan managers that we spoke with also utilized more 
sophisticated calculators on their Web sites than does TSP. For 
example, one plan manager's Web site provided a calculator that would 
project a participant's account balance given certain hypothetical 
parameters, such as number of years before retirement, that the 
participant can select. The calculator is securely linked to the 
participant's account, and certain items, such as the participant's 
account balance and historical rate of return on assets, are 
automatically entered into the calculator, simplifying the process for 
the participant. TSP also offers an account projection calculator, but 
the calculators they offer are not on a secure server and all 
parameters must be specified manually, and the participant may not know 
what assumptions, like the estimated rate of return, are reasonable to 
specify. The plan managers that we spoke with told us that participants 
are more likely to use and benefit from tools such as the retirement 
income projector if they are convenient and easy to use.

All of the private plan managers that we spoke with emphasized the 
importance of keeping abreast of the latest technology and industry 
trends in order to provide participants with the highest possible level 
of customer service. For example, two plan managers told us that they 
regularly and systematically review not only their competitors' Web 
sites for new ideas and innovations, but they also study the Web sites 
of other companies, such as Yahoo and Amazon, to keep abreast of the 
latest technological developments. Because TSP managers are not taking 
full advantage of such technology, TSP participants may not receive the 
benefits it offers. As plan managers have continually updated their Web 
sites to incorporate more sophisticated features, they have 
simultaneously experienced increased Web usage and decreased calls to 
service representatives by participants. Another manager stated that 
certain Web features could reduce mailing costs by allowing plan 
managers to provide some information electronically.

Although TSP managers have a simple and functional Web site available 
for participant use, the site does not offer the flexibility and 
convenience of the Web sites provided by the private plan managers that 
we reviewed. Although TSP managers told us that they have recently 
taken steps to learn about industry innovations--including talking to 
and occasionally visiting private sector plan managers, viewing private 
sector Web sites, and reviewing the literature from researchers in the 
field, they have not yet institutionalized the routine collection of 
information to regularly and systematically assess trends and 
innovations in the defined contribution industry.[Footnote 26]

Conclusions:

TSP has become one of the largest retirement savings plans in the 
United States, and it must provide customer support and record keeping 
for millions of participants across many federal agencies throughout 
the United States and, in some instances, the world. TSP must exchange 
information with multiple federal agency payroll, personnel, and data- 
processing representatives and handle millions of participant 
transactions every month. In addition, TSP relies on other federal 
agencies to provide participants' benefit information, including 
educational and other information, on TSP. Because these 
characteristics make TSP unique, its approach to customer service is 
naturally somewhat different from that of other pension plans. 
Nonetheless, some aspects of private sector practices seem appropriate 
for TSP managers to consider. For example, as TSP managers continue to 
modernize their customer service operations, they should look for 
opportunities to use participant feedback to identify broader 
innovations to improve their services, in addition to focusing on 
individual participants' specific concerns. The practices of private 
sector plan managers suggest that direct, ongoing participant feedback 
is invaluable in responding to the changing needs of plan participants. 
Without obtaining more frequent and representative feedback from 
participants, TSP managers cannot determine what improvements would 
best satisfy participants' needs.

While recognizing the recent improvements made to TSP's customer 
service--such as the new record-keeping system, the additional call 
center, and toll-free telephone service--we conclude that TSP could 
benefit from additional measures that could enhance customer service 
further. For example, the innovative, technological, and operational 
practices that have become commonplace in the private sector customer 
service industry might be means to continual customer service 
improvements at TSP. Also, TSP could benefit from regular and sustained 
examination of private sector customer service practices. As TSP 
participants become more familiar with online financial transactions 
and the services provided by private plan managers, participants may 
come to expect services not currently provided by TSP. However, the 
costs of making changes to TSP's services would have to be balanced 
against the potential benefits such changes could provide to 
participants and the plans themselves.

Recommendations for Executive Action:

To help ensure that federal workers have the options needed to 
effectively plan and to encourage them to save for retirement, TSP 
managers should continually seek new ways to improve their customer 
service operations. Both the potential costs and benefits should be 
weighed in making decisions about changes to service. Therefore, we 
recommend that the Federal Retirement Thrift Investment Board direct 
the Executive Director to take the following actions:

* Develop and implement an evaluation effort to systematically assess 
the level of customer satisfaction and to identify, as needed, areas of 
potential improvement for the ThriftLine, caller assistance center, Web-
based transaction system, and TSP coordinator program. It should 
consider a variety of different approaches, including traditional 
methods such as surveying participants annually through the mail or 
telephone to assess their overall level of satisfaction with the 
services provided, supplemented by other approaches, such as exploring 
the use of Web-based and automated telephone call evaluation tools to 
randomly survey TSP participants.

* Institutionalize the routine collection of information from the 
largest private sector plan managers to keep up with current industry 
trends and assess whether the new and existing practices used by 
private managers would prove advantageous and cost-effective to TSP.

Agency Comments and Our Evaluation:

We obtained written comments on a draft of this report from the Federal 
Retirement Thrift Investment Board and made changes to the report as 
appropriate. The full text of these comments is reproduced in appendix 
II. In response to the Board's comments, we added information regarding 
its plans for surveying participants. We also added information 
regarding the Board's recent announcements that it will review the 
service provided by private plan managers. The Department of Labor was 
also provided a draft of this report for review and advised us that it 
had no comments.

In its written comments, the Board disagreed with our recommendation 
regarding the implementation of an evaluation effort to assess the 
level of customer satisfaction. The Board stated that our 
recommendation was moot because the Board had previously announced its 
intention to survey TSP participants on a variety of topics, including 
client satisfaction. However, in its February 2004 monthly meeting, the 
Board said that such a survey would not be conducted for at least 
another 2 years. As we state in our report, the private sector plan 
managers that we spoke with believe that direct, ongoing participant 
feedback is needed to respond to the changing needs of plan 
participants. Without obtaining more frequent feedback from 
participants, TSP managers cannot determine what improvements would 
best satisfy participants' needs. The Board also suggested that certain 
aspects of plan performance indicate increased participant 
satisfaction. In particular, the board stated that TSP's high 
participation rate, increased number of transactions, and low account 
withdrawal rate among inactive participants, such as retirees or former 
employees, imply a high level of participant satisfaction. Although 
such performance measures provide an indication of participant 
satisfaction, more sophisticated efforts, such as participant surveys, 
are needed to provide direct information on the changing needs of plan 
participants and what improvements would best satisfy those needs. We 
recognize that these efforts may require substantial resources, which 
is why other means, such as exploring the use of Web-based and 
automated telephone call evaluation tools to randomly survey TSP 
participants, are needed as supplementary efforts. Without a systematic 
effort to obtain feedback from participants, the Board is not in the 
best position to determine participant satisfaction.

The Board also disagreed with our recommendation that it should 
routinely solicit information from the largest private plan managers to 
assess whether their practices would be advantageous and cost-effective 
if adopted by TSP. The Board said that it has conducted and will 
continue to conduct on-site reviews of the largest private plan 
managers to determine the services they provide and the technological 
capabilities they plan for the future. While the Board's recent visits 
to such plan managers are a positive step, we believe that a routine 
and systematic effort to survey practices used in the private sector 
customer service industry should be institutionalized as a regular 
aspect of TSP's operations. Further, in considering which new practices 
to adopt, the Board would need to weigh the costs of making changes to 
TSP's services against the potential benefits to participants and the 
plans themselves. Conducting such cost/ benefit analyses is a 
management function and would be inappropriate for GAO to initiate.

The Board suggested that the section of our report on customer service 
options questions the federal government's reliance on agency 
retirement counselors for the delivery of TSP information and service. 
This section of the report was descriptive, illustrating the different 
ways in which private sector entities and TSP managers provide customer 
service. While we noted that some federal agencies use on-site 
coordinators, we observed that, in general, the private sector tended 
to rely less on coordinators and more on call center representatives, 
automated telephone services, and Web sites to deliver informational 
and transactional resources to the participants. The Board stated that 
it rejects the suggestion that the focus of retirement education be 
shifted away from retirement counselors. We are not suggesting that the 
agencies move away from retirement counselors, but we emphasize that 
providing retirement information through the use of retirement 
counselors does not preempt TSP managers from also providing such 
information through call centers and Web sites.

The Board questioned the feasibility and value of implementing several 
customer service features used as examples in the draft report. For 
example, we included a discussion about a private sector Web site that 
could display a graph of the projected growth rate of a participant's 
account at the current contribution rate as well as at a slightly 
higher hypothetical rate to demonstrate the effect of higher 
contributions. This example was used only to illustrate the type of 
educational features used by the private sector and was not necessarily 
intended as a specific recommendation to be implemented. However, we 
maintain that the private sector offers a range of Web features, 
particularly those concerning education and retirement information, 
that are not available to TSP participants. Similarly, other examples, 
including on-the-spot participant surveys and more flexible options for 
statement preparation, were intended to illustrate the types of 
advanced tools private sector plan managers provide to their 
participants rather than as specific recommendations to be implemented.

The Board also stated that the draft ignored TSP's superior performance 
results as measured by key standards that demonstrate that TSP 
significantly outperforms the private sector. In response, we noted 
that TSP had generally met its standard for call center performance 
measurement, such as the percentage of all calls answered within 20 
seconds, except for a period of about 10 months of increased caller 
volume as the Board implemented its new record-keeping system. However, 
as presented in the draft, private managers told us that they 
downplayed the importance of quantitative measures and instead focused 
on ensuring that service representatives fully satisfied each 
customer's needs efficiently and politely in one call. Specifically, 
private sector managers emphasized this policy of first-call resolution 
as an overriding goal and viewed the quantitative measures, such as 
those emphasized by TSP, as secondary or, in some cases, an inaccurate 
measure of call center performance.

Finally, the Board stated that the draft failed to address three of the 
five areas of interest to the committee. At the conclusion of the 
design phase of our study, GAO and the committee staff agreed to the 
objectives stated at the beginning of this report. We eliminated the 
other areas of interest largely because they overlapped with the scope 
of an ongoing audit by the Department of Labor of TSP's customer 
service.

As agreed with your office, 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 Secretary of Labor, the Federal Retirement Thrift Investment 
Board, appropriate congressional committees, and other interested 
parties. In addition, we will make copies of this report available at 
no charge on GAO's Web site at http://www.gao.gov/.

If you have any questions concerning this report, please contact me at 
(202) 512-7215 or Tamara Cross at (202) 512-4890. Other major 
contributors include Daniel Alspaugh, Amy Buck, Richard Burkard, Erin 
Daugherty, Malcolm Drewery, Michael Morris, Corinna Nicolaou, and Roger 
Thomas.

Sincerely yours,

Signed by: 

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

[End of section]

Appendix I: Scope and Methodology:

To describe how Thrift Savings Plan (TSP) managers provide customer 
service, we interviewed TSP managers at the Federal Retirement Thrift 
Investment Board headquarters in Washington, D.C., and officials at the 
Department of Agriculture's National Finance Center (NFC), which has 
been the major contractor for account maintenance and participant 
support since TSP began operations in 1987. In addition, we reviewed 
documentation governing TSP's customer service operations, attended 
monthly Board meetings, and interviewed officials at the Department of 
Labor and the Employee Thrift Advisory Council (ETAC). Specifically, to 
describe the customer service operations of the ThriftLine and call 
center, we also observed center operations at the NFC in New Orleans, 
Louisiana, including customer service representatives taking telephone 
calls from TSP participants; we also collected and reviewed information 
on the number of calls made to the ThriftLine, the percentage of calls 
answered within specified time frames, and the number and duration of 
calls referred to a customer service representative. To describe the 
customer service operation of the TSP Web site, we also observed and 
documented the information and features available on the Web site 
through our personal computers at GAO and obtained information from TSP 
managers on the number of visits made and transactions conducted over 
the TSP Web site. We also interviewed TSP managers and NFC officials 
regarding the reliability of their call center or Web site data, such 
as the number of calls received or the number of interfund transfers 
transacted through the Web site. However, they were unable to provide 
information about any reliability tests that might have been performed. 
Call center and Web site data are presented here for illustrative 
purposes. Because these data are not central to the findings, 
conclusions, or recommendations of this report we did not assess their 
reliability. To describe the role of the agency coordinator, we also 
interviewed nine TSP coordinators, selected on the basis of a nonrandom 
sample of federal agencies with 5,000 or more employees (U.S. Postal 
Service, Department of Defense, Social Security Administration, and 
General Services Administration) and federal agencies with fewer than 
5,000 employees (Government Accountability Office, Federal Trade 
Commission, Office of Personnel Management, Small Business 
Administration, and the Railroad Retirement Board). We also reviewed 
the Federal Employees' Retirement System Act and Department of Labor 
guidance on responsibilities of the federal agencies participating in 
TSP.

To describe how private sector plan managers provide customer service 
through call center representatives, automated telephone systems, Web 
sites, and on-site representatives, we visited managers of other large 
defined contribution plans, conducted interviews, observed their 
customer service operations, and in some cases obtained documentation 
on their operations. Specifically regarding private call center 
representatives and automated telephone systems, we obtained 
information regarding their customer service philosophies, use of call 
center benchmarks, call center staff training and evaluation policies, 
call center technology, and call volume management. In some cases, we 
obtained call center representative training manuals and call center 
statistics. We also listened to live calls with call center 
representatives and observed the software tools used by these 
representatives to assist callers at some of the plan managers that we 
visited. We also observed their Web site pages and features, such as 
their retirement calculators and education materials and discussed how 
often they update their Web sites and how they determine what to 
include on their sites with management and information technology 
specialists.

To identify customer service practices used by private sector plan 
managers that TSP managers could consider to improve its services, we 
also obtained copies of both online and printed customer service- 
related survey instruments and, in some cases, survey results, and 
discussed with plan managers how they used this information to 
determine what changes would be made to their customer service delivery.

To select managers of similar defined contribution plans for 
comparison, we selected 4 of the top 10 private sector plan managers 
and 1 of the top 3 state and local government agency plans based on 
total plan assets under management as of December 31, 2002, as reported 
by Pensions & Investments and Plan Sponsor Magazine. The five plan 
managers that we spoke with had an average of $169.8 billion under 
management and serviced an average of 4.8 million participants. They 
ranged in size from $9.8 billion to $282.0 billion under management and 
from 150,000 to 10.3 million participants. We also spoke with private 
and public pension industry groups such as the Profit Sharing Council 
of America and the National Association of Government Defined 
Contribution Administrators about our selection methods.

[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:

THRIFT SAVINGS PLAN: 

GARY A. AMELIO:
Executive Director:

November 8, 2004:

Ms. Barbara D. Bovbjerg:
Director of Education, Workforce, and Income Security Issues: U.S. 
Government Accountability Office: 
Washington, D.C. 20548:

Dear Ms. Bovbjerg:

This responds to your request for comments on the draft report now 
entitled "Federal Thrift Savings Plan: Practices Adopted by Private 
Sector Plan Managers Could Help Improve Customer Service." The draft 
report recommends that the Thrift Savings Plan (TSP):

1) regularly and systematically assess the level of participant 
satisfaction with the customer service provided, and:

2) routinely survey the largest private sector plan managers to assess 
whether the new and existing practices used by private managers are 
applicable and if they would prove advantageous to the TSP.

With regard to the first recommendation, upon my appointment as 
Executive Director of the TSP in June 2003, I publicly announced my 
intention to survey TSP participants on a variety of topics, with 
particular emphasis on satisfaction. However, it was clear to me that 
participants should not be surveyed until they had acquired some 
experience with the new record keeping system which was just then being 
introduced.

Although my public statements are not reflected in the draft report, 
they, were discussed and explained to your staff. You were also advised 
that the hiatus in surveying participants during the late 1990s was due 
to the pending implementation of the new record keeping system. 
Surveying participants on satisfaction with the legacy system would 
have been a worthless exercise and a waste of participant resources. 
This key information is also not reflected in the draft. In effect, the 
first recommendation mimics a decision I announced before the GAO began 
its work in November 2003, and is therefore moot.

The draft does note the convenient multiple routes available to 
participants who wish to provide feedback until the survey instrument 
is instituted. A most extraordinary demonstration of participant 
feedback is the fact that more than 600,000 TSP participants who have 
stopped contributing can transfer their TSP account balances to private 
plans with the features you describe and suggest are desirable. Instead 
they keep their retirement funds on account in the TSP, many until the 
last possible moment before the Tax Code requires their withdrawal. 
Moreover, we have accepted 24,000 transfers totaling $700 million from 
other plans since July 2001 for participants who prefer the TSP to 
their previous retirement plans. Complaints in written correspondence 
and e-mail have diminished substantially as the new system and other 
improvements have been implemented. Nevertheless, prudent steps to 
survey for participant satisfaction levels will be taken as discussed.

Regarding the second recommendation, I am intimately familiar with 
industry practices, given my twenty two years of experience with 
private sector retirement plans and investments before arriving at the 
TSP. I and senior staff at the Agency remain current through 
participation in industry-sponsored events. Further, I and the senior 
staff have and will continue to personally visit the operational 
centers of the largest and most respected institutions in the industry 
to conduct on-site reviews of the levels of service provided and the 
technological capabilities planned for the future. Indeed, I announced 
four of such visits in a public Board meeting two months ago. In fact, 
a member of your staff was present at the meeting. I consider this type 
of hands-on interface with the industry superior and far more useful 
than having the Agency survey for data that is often already available 
from industry sources. Thus, I view this recommendation as sub-optimal 
and also moot.

The draft report questions the Federal government's focus on retirement 
counsellors at the various employing agencies as a key point for the 
delivery of TSP information and service.

I was confused by the inclusion of this concern in the report because 
the counsellors exist as a matter of law and are a well-established, 
successful practice. I subsequently learned from Agency staff that the 
Income Security Issues group of the Health, Education and Human 
Services Division of the GAO previously questioned this arrangement 
when it recommended that the Federal Retirement Thrift Investment Board 
(Board) assume educational responsibilities for retirement matters 
beyond the scope of the TSP (GAO/HEHS-96-1).

The Board strongly objected to that recommendation (as did the then- 
Chairman of the Senate Committee on Governmental Affairs) and it was 
never implemented. The General Government Division (GGD) of the GAO 
issued a subsequent report (GAO/GGD-99-27) validating both the Board's 
view and the cooperative work performed by OPM, the Board, and the 
counsellors at the employing agencies. That report was aptly entitled 
"Federal Retirement: Key Elements Are Included in Agencies' Education 
Programs." Agency staff had hoped this thoughtful, fact-based work by 
the GGD had put this issue to rest, and we shared it with the 
evaluators on the current project.

However, the current draft returns to this design issue, again 
questioning its wisdom by asserting that private sector 401 (k) plans 
primarily (and increasingly) use their web sites for education, and 
suggesting a move away from the retirement counsellors. What is truly 
baffling about this recurrent questioning of how retirement information 
is provided government-wide is the fact that the key performance 
measurements of the success of 401(k) type plans --voluntary 
participation rates and the cost of running a plan --demonstrate that 
the TSP substantially outperforms the private sector.

The draft ignores these superior performance results and suggests 
shifting the focal point of education from the statutorily established 
retirement counsellors --who are paid for by employing agencies, tailor 
their activities to agency and individual needs, and provide the full 
range of assistance on all retirement matters throughout the employees' 
career --to a phone-based approach that would comport with private 
sector practice. (Interestingly, while the draft states that "Private 
sector companies have been moving away from face-to-face service 
delivery approaches toward live telephone assistance to meet consumers 
expectations for fast and convenient service and to provide this 
service more cost-effectively," it does not address whether those costs 
are shifted from the employer to the plan participants in the process. 
That is what would happen if the TSP were to follow this model, and I 
expect that it also happened in the mail delivery example cited in the 
draft. Indeed, vendors are often happy to take on additional tasks 
which increase their profit, and employers are often happy to shift 
those costs to the plan, since plan costs are usually paid by 
participants.)

Although we will continue to take appropriate advantage of evolving 
capabilities, we again reject the suggestion that we shift the focus 
away from retirement counsellors. This approach --which was established 
by the Congress, validated by the GGD report, and fully-integrated into 
the Federal establishment --has produced low costs for participants and 
superior results that may be worthy of emulation by the private sector 
(rather than the other way around).

Indeed, I recommend that the unsupported bias toward private sector 
plans evident in the title of the draft be purged since it is not 
substantiated by performance measures or facts. An appropriate, 
unbiased, and fully descriptive title would be "Comparison of some 
customer service provisions within the TSP with those offered by some 
private sector managers." I recommend that the stray suggestions in the 
text not supported by a recommendation be excised as well. Simply 
listing well-known "customer service practices used by private sector 
managers that could be used to improve TSP's service" has no value when 
GAO is unwilling to make and support a recommendation that the 
specified practices "should" be used.

I am disturbed that this Agency expended substantial time and energy to 
comply with your staff's multiple requests for information, yet the 
draft fails to address three of the five areas of interest cited by 
Chairman Susan Collins in her letter of November 3, 2003, (attached) 
i.e.:

-describe the extent of the FRTIB oversight of customer service 
operations;

-determine to what extent TSP tracks requests for assistance and 
complaints from TSP participants and actions taken to respond to such 
concerns;

-discuss steps TSP has taken to improve customer service.

Agency staff provided all of the information requested by the GAO in 
these areas. We also offered extensive data demonstrating thorough 
oversight, tracking, and responsiveness, as well as documenting the 
extraordinary improvements in customer service resulting from the 
implementation of the new TSP record keeping system just over a year 
ago. The latter has truly revolutionized TSP service with state-of-the- 
art functionality including web transactions, paperless statements, 
daily valuation, streaming (rather than monthly) disbursements and 
more, in a performance environment that meets or exceeds the best 
practices in the industry.

Although the draft notes that the TSP meets the industry call center 
standard of 20 seconds/'90% of calls, much more relevant and 
illuminating information is unreported. Other service performance which 
meets or exceeds industry standards, and would apparently be responsive 
to Chairman Collins' request, are simply not discussed.

For example, the largest day to day service demands of TSP participants 
are for interfund transfers, loans, and withdrawals. Our goal is that 
the vast majority of these participants receive outstanding service 
without needing to speak to call center representatives to obtain these 
transactions. The automated system we put in place last year allows 
each participant to manage TSP investments and execute transactions 
directly. This service is convenient for participants, administratively 
efficient, and cost effective. It is the most sweeping improvement in 
the TSP's history. Interfund transfers that used to take two to six 
weeks are now performed daily. Loans and withdrawals that used to take 
four to eight weeks to complete now take one to two. The volume of call 
center inquiries, which was increasing, has now declined. Participant 
letters of complaint, which were rising, are now heading down. Yet, the 
draft takes no notice of the dramatic service improvement or the 
obvious salutary effect it has had on participant satisfaction.

The draft suggests that more participant funds be invested in 
technology. Indeed, in my meetings with industry leaders, one discussed 
his plan to spend $1.5 billion each year on technology, and another 
reported spending 25 percent of gross revenue on the same. While such 
an approach might be prudent for a company needing to offer "bells and 
whistles" to compete with others for market share, a similar approach 
by the TSP is unnecessary, unwelcome by the participants who pay the 
freight, and in my view, inconsistent with the provision in our law 
requiring that the Board develop policies providing for low 
administrative costs. 5 U.S.C. ß8475.

The draft also suggests the use of "pop-ups" and a web icon to obtain 
feedback from all users. However, many web users find pop-ups extremely 
annoying, and analyzing ongoing feedback from 3.3 million participants, 
absent evidence from the GAO of the need for such an undertaking, would 
be imprudent.

The draft further suggests the creation of "customized account 
statements." I am unaware of any need or justification for such a 
feature in the TSP, and even the industry views this as an unnecessary 
and expensive frill.

Had we been made aware in advance of some of the suggestions that were 
to appear in the draft, they could have been discussed and potentially 
resolved. For example, the draft suggests connecting TSP calculators to 
actual individual account balance information, a feature that was 
offered by one manager and arguably provides some marginal convenience. 
However, we made a deliberate decision to not connect such 
functionality to our secure server for both security and privacy 
reasons. Had this been discussed in advance, we expect the evaluators 
would have recognized the wisdom of our approach and not included the 
suggestion in the draft. There were other such examples as well.

Finally, although I have attempted to address the contents of the draft 
report, I must emphatically note that it fails in any way to provide a 
cost/benefit analysis for its recommendations and other suggestions. 
The very last sentence of the draft, that such an analysis is 
necessary, adds nothing, since cost is the most critical point for the 
consideration of operational changes in the daily valued defined 
contribution sector. Anyone familiar with industry practice knows that 
daily plan cost is determined by expense ratio and per participant 
analysis. The TSP's costs are far lower, on both measures, than any 
industry provider or sponsor.

The obvious absence of any cost/benefit data substantially diminishes 
the value and credibility of the draft. If the Government 
Accountability Office intends to publicly issue recommendations and 
suggestions to alter the design or operations of the TSP, it should at 
a minimum support its proposals with its cost/benefit analysis. This is 
especially important since TSP costs are borne by the participants, and 
ultimately reduce their retirement account balances.

In an effort to correct these and other deficiencies, and produce a 
draft that is more responsive to the Chairman's request, I have asked 
my staff to remain available to review with your staff the current 
draft, line by line if necessary, to create a more useful product. If 
you would like to do so, please feel free to contact Tom Trabucco at 
(202) 942-1641.

Very truly yours,

Signed by: 

Gary A. Amelio: 

[End of section]

FOOTNOTES

[1] Assets and participants are as of December 31, 2003.

[2] As provided under 26 U.S.C. 401(k) of the Internal Revenue Code, 
certain defined contribution plans allow employees to reduce a portion 
of their current compensation via a contribution, on a pretax basis, to 
a qualified retirement account. Generally, there are two types of 
pension plans: defined benefit plans and defined contribution plans. A 
defined benefit plan promises a benefit that is generally based on an 
employee's salary and years of service. The employer is responsible for 
funding the benefit, investing and managing plan assets, and bearing 
the investment risk. In contrast, under a defined contribution plan, 
benefits are based on the contributions to and investment returns on 
individual accounts, and the employee bears the investment risk.

[3] Customer service for many private and public sector defined 
contribution plans is delivered by a private sector "plan manager" that 
is hired by the company that is offering the defined contribution plan 
to its employees (the plan sponsor). These private sector managers 
typically handle all of the plan's customer service-related activities 
in addition to the plan's record-keeping activities. Most private 
sector plan managers provide services to several different plan 
sponsors. 

[4] Record keeping includes, but is not limited to, activities such as 
posting contributions to participant accounts, adjusting account 
balances for gains and losses, and processing loans and withdrawals.

[5] Federal Retirement Thrift Investment Board, TSP's governing body, 
still seeks to offer new features. For example, TSP managers reported 
that they began providing toll-free telephone service in July 2004, to 
enable TSP participants and beneficiaries to obtain account or 
transaction information via the ThriftLine's automated telephone 
service 24 hours a day, 7 days a week.

[6] The Department of Agriculture's National Finance Center has been 
the major contractor for account maintenance and participant support 
since TSP began operations in 1987.

[7] We selected 4 of the top 10 private sector plan managers and one of 
the top three local government agency plans based on total plan assets 
under management as of December 31, 2002. See appendix I for more 
detail.

[8] Most of the private sector plan managers that we spoke with 
serviced from several hundred plans to several thousand different 
plans. We also interviewed the managers of one large self-managed 
public sector plan. See appendix I for more detail.

[9] In the federal retirement system, the Office of Personnel 
Management (OPM), rather than TSP, is required to establish a training 
program for all retirement counselors. However, the Board has 
responsibility for providing information to plan participants to 
facilitate informed decision making with respect to what level of 
contribution to make and how to invest those contributions. See GAO, 
Thrift Savings Plan, HEHS-96-66R (Washington, D.C.: Nov. 14, 1995).

[10] Pub. L. No. 99-335, June 6, 1986.

[11] FERSA created the Federal Employees' Retirement System (FERS), a 
three-part retirement system for federal employees, including 
enrollment in Social Security, a defined benefit plan, and TSP, a 
defined contribution plan.

[12] Civil Service Retirement System (CSRS) is a retirement plan for 
federal employees and covers employees hired prior to January 1, 1984. 
It is a defined benefit plan, a plan that specifies the benefit to be 
received at retirement by the participant.

[13] 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. The G Fund, managed by the Board is comprised 
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 comprised 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. The Small 
Capitalization Stock Index Investment Fund, or S Fund, is invested in 
Barclays Extended Market Index Fund and is managed to track the 
Wilshire 4500. 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] 5 U.S.C. 8474 (a)(1) and 5 U.S.C. 8473 (a).

[15] The Employee Thrift Advisory Council is comprised of 15 federal 
employees and consists of four members representing the four largest 
labor unions; six representing labor, managerial, and supervisory 
organizations in the U.S. Postal Service; one representing employee 
organizations having the purpose of promoting the interests of women in 
government service; one from the organization with individuals 
receiving the largest number of annuities under FERS or CSRS; one from 
the organization representing the largest number of supervisors and 
management officials; one representing the agency with the largest 
number of members of the Senior Executive Service; and one from the 
uniformed services. (5 U.S.C. 8473 (b)).

[16] 5 U.S.C. 8432; 5 U.S.C. 8432(b); and 5 U.S.C. 8350.

[17] According to TSP managers, the ThriftLine receives an average of 
about 17,000 phone calls per day.

[18] TSP has two call centers. The call center located in New Orleans, 
Louisiana, receives approximately 8,500 telephone calls per day from 
TSP participants and has about 100 call center representatives 
answering calls daily. The new call center located in Cumberland, 
Maryland, which is operated by Spherix Inc., has about 55 call center 
representatives answering calls daily. 

[19] We did not assess the reliability of the call center data. See the 
section on scope and methodology in appendix I.

[20] Calls averaged about 3 minutes and 21 seconds plus about 1 minute 
and 45 seconds for service center representatives to record their notes.

[21] In the past, TSP managers automatically mailed paper statements to 
3.25 million participants four times per year. To reduce costs, in 
2003, TSP managers announced that they would send paper statements only 
if participants requested them. Since then, only 473,000 participants 
have requested to continue receiving paper statements, saving $3.3 
million dollars per year in administrative costs.

[22] Department of Labor's audit guidelines, Nov. 1, 2001. Section 
8477(g) of 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. To guide the auditors, the department has 
developed a fiduciary oversight program that uses detailed guides to 
test for compliance.

[23] Agencies generally refer to retirement counselors and other 
retirement education staff as benefits officers, according to 5 U.S.C. 
8350.

[24] 5 U.S.C. 8350.

[25] Unlike pop-up advertisements that may be unwelcome to Internet 
users, the surveys provide participants the opportunity to give 
feedback through a convenient method according to plan managers, 
especially if participants were having difficulty with the Web site or 
if they had suggestions for improving the functionality of the site. 
The on-the-spot surveys that we observed appeared to be short and easy 
to fill out.

[26] At the September 20, 2004, TSP Board meeting, the Executive 
Director announced his intention to visit the operations of a few 
select private sector plan managers.

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