Lower TSP Fees, Higher Satisfaction: What’s Driving the Change?

February 6, 2025

Federal employees and retirees contributing to the Thrift Savings Plan (TSP) are getting a better deal than ever before. Due to cost-cutting efforts by the Federal Retirement Thrift Investment Board, administrative expenses have declined over the past two years, leading to lower fees for participants. Jim Kaplan, Director of External Affairs at the Board, joined Francis to discuss these financial improvements, participant satisfaction trends, and upcoming enhancements to the TSP.

Lower Fees, More Savings for TSP Participants

One of the biggest takeaways from the discussion is the decline in fees that TSP participants are paying for administrative and management costs. In 2024, those costs dropped to 3.6 basis points, down from 4.8 basis points the previous year. That means for every $1,000 a participant has in their TSP account, they are paying just 36 cents in administrative fees—a fraction of what many private-sector retirement plans charge.

Kaplan emphasized that these reductions stem from the Board’s commitment to efficiency. "Every dollar we don’t spend is one that stays in our participants’ accounts," he explained. The TSP operates differently from traditional government agencies because it is funded directly by participant fees rather than taxpayer dollars. As a result, the organization actively seeks cost-saving opportunities without compromising service quality.

How the TSP Keeps Costs Low

While many retirement funds charge annual fees as high as 1%, the TSP’s approach remains highly cost-effective. Kaplan noted that one key factor in these reductions has been the transition to a new record-keeping system, Converge. While the system had challenges at launch, it has since helped streamline operations, leading to lower costs.

"We’re constantly looking for ways to reduce expenses while maintaining high-quality service," Kaplan said. "As we’ve gotten better at using our record-keeping system, our expenses have gone down, and the savings are passed directly to participants."

The TSP team meets regularly with its contractor, Accenture Federal Services, to ensure service benchmarks are met. These meetings track call center response times, loan processing speeds, and withdrawal timelines, leading to continuous improvements in service delivery.

Rising Satisfaction Among TSP Participants

Despite early issues with the Converge system’s rollout, TSP participants are reporting increased satisfaction across all service channels. Call center response times have improved, online services have become more user-friendly, and mobile app adoption has surged.

"The data shows that participant satisfaction is up in 2024," Kaplan said. "More people are using the TSP app, and they’re finding it easier to manage their accounts online."

The Board also conducts annual surveys to gauge participant feedback. One recent survey, the Full Withdrawal Exit Survey, polled individuals who withdrew their entire TSP balance. The results were encouraging—87% of respondents who moved their money elsewhere still expressed satisfaction with the TSP. Most cited reasons unrelated to service quality, such as consolidating retirement accounts or seeking more investment options.

However, one area for improvement stood out: Some participants mistakenly believed they had to close their TSP accounts after leaving government service. "We’re working on better communication to let people know they can keep their TSP accounts even if they leave the federal workforce," Kaplan noted.

Upcoming TSP Enhancements in 2025

1. In-Plan Roth Conversions – Participants will soon be able to convert traditional TSP funds into Roth TSP accounts. This new feature will provide more flexibility for federal employees who want to manage their tax exposure in retirement.
2. New L 2075 Fund – This summer, the TSP will launch a new Lifecycle Fund, L 2075, designed for younger federal employees planning to retire around 2075. Lifecycle Funds automatically adjust asset allocations over time, shifting from growth-focused investments to more conservative holdings as retirement approaches.