Military Personnel Now Eligible for TSP

October 19, 2001

Beginning this week, 2.5 million members of America's armed forces will be able to participate in the Federal Thrift Savings Plan (TSP) on the same basis as Federal civil service and postal employees. The additions will bring to roughly 5 million the number of workers participating in the defined contribution retirement program often mentioned as a model for a privatized Social Security system. Workers are able to invest in one of five different private investment funds, ranging from bond funds to stock funds. The success of the TSP shows that is possible to administer millions of small individual investment accounts and that workers without a great deal of experience are able to make their own investment decisions.

In August, Roger Mehle, executive director of the Federal Retirement Thrift Investment Board, which manages the TSP, testified before the President's Commission to Strengthen Social Security and pointed out that, workers have earned returns ranging from 6.7 percent for the bond fund to 17.4 percent for the stock fund. Mehle also testified that the TSP has extremely low administrative costs. Expenses for managing the TSP range from 5 basis points (five one-hundredth of a percent of assets managed) for the bond fund to 7 basis points for the stock fund.

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