TAKING STOCK: Civil service investment plans

Dear Mr. Berko:

I will soon have a civil service job. I understand the medical plan, vacation policy and other perks, but I don't understand the Thrift Savings Plan, which is like a 401(k). I understand the contributions, the matching contributions, etc., but I do not understand the investments. I can't even tell how the funds performed in the past, who does the investing, and I can't even find the fund's symbols or where they are listed. Is this a good plan compared to other mutual funds?

R.E., Cincinnati

Dear R.E.:

The six individual Thrift Savings Plans are coordinated by 80 honest employees of the Federal Retirement Thrift Investment Board. And four of the six funds within your TSP are managed externally by BlackRock Institutional Trust, a highly regarded management firm in Wilmington, Del. Two of these funds, as you will see later, do not require active management. And suffice it to say, your TSP is one of the few government agencies whose success should be vigorously applauded.

Chairman Andrew Saul, who makes certain this $220 billion plan with 3.8 million participants, runs smoothly, has remained aloof to congressional influence and tampering. As a result, Congress hasn't been able to pimp these funds (as it does with Social Security) to support its cash-short projects. Over the years, some politicians have lusted over those untouched billions, but Saul and his predecessors have remained steadfastly impervious to the entreaties of some of the powerful members of Congress.

Meanwhile, BlackRock Institutional Trust has done a yeoman's job of managing this money, doing a tad better over the one-year, three-year, five-year and 10-year benchmark time frames used by Wall Street as a standard of performance. Though BlackRock runs the portfolios of F, C, S and I funds, those securities are held in a trust (unlike the Social Security Trust) and can't be used by BlackRock to meet any of its obligations.

The F Fund owns government, corporate- and mortgage-backed bonds, and its performance is a few basis points better than the Barclays Capital U.S. Aggregate Bond Index. It has very low to moderate risk and a 10-year average annual return of 6.39 percent.

The C Fund has moderate risks and holds stocks of large- and medium-sized U.S. companies, and its performance tends to match that of the Standard & Poor's 500 Averages. Its 10-year average annual return of -0.94 percent is a better return than 93 percent of all U.S. Equity Mutual funds.

The S Fund has a portfolio of small- to medium-sized U.S. companies, and its performance is just two basis points under the performance of the Dow U.S. TSM Index, which includes almost every U.S. stock except those of the S&P 500. It has high to moderate risks.

And finally, the I Fund owns foreign securities from 21 developed nations. Its performance is a smidgen better than the Morgan Stanley EAFE Index and has moderate to high risks.

The G fund is managed by the Federal Retirement Thrift Investment Board and is comprised of non-marketable U.S. Treasury securities with short- to medium-length maturities. It's guaranteed by the government and cannot lose money.

The L Fund portfolio owns the G, F, C, S and I funds. The five portfolios in this fund provide broad market diversification, and the different allocations tend to reduce market risks.

Now, the reason you cannot find these funds is that they are not available to the public. They are regulated by the Comptroller of the Currency, not the SEC (thank goodness) and don't have ticker symbols.

However, if you participate in the TSP, you will be given an ID number with which you can access fund performance and current values. It's too bad that state, municipal and corporate plans are not run with the same care and diligence.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2011 Creators Syndicate Inc.

Published: Fri, Feb 25, 2011


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