Some participants protest new Thrift Savings Plan policy

An effort by Thrift Savings Plan officials to quell frequent online trading has drawn fire from some TSP participants, who have started an online petition protesting proposed limits on share trading. Under an interim rule issued in January, the Federal Retirement Thrift Investment Board granted authority to the plan’s executive director to ask frequent traders to stop the practice. Officials say excessive trading by a small number of participants — about 3,000 of the plan’s 3.8 million shareholders — has caused transaction costs, including brokers’ fees, to soar in recent years. From 2005 to 2006, those costs, which are borne by TSP shareholders, more than doubled, from $6.7 million to $15 million, officials said. But some participants, backing a petition posted on a Web site by a newly formed online advocacy group for TSP shareholders, believe they have the right to fully manage their investments, particularly in a wildly fluctuating stock market. “Volatility is the nature of the market and especially as evidenced these days,” wrote a participant in Virginia. “Because of this volatility, investors need to have the advantage of being able to transfer on a daily basis to protect our investments against the negative effects of volatility.” “We should have the right to transfer our funds as we see fit,” wrote a shareholder in Washington. “Don’t mess with my money! I should be able to move my funds when I see fit,” said another Washington participant. Nonetheless, TSP’s cease-and-desist notifications appear to be having an impact. Only 549 of the more than 3,000 known frequent traders disregarded the new policy in February, according to a published report. TSP has proposed a regulation that would limit interfund transfer requests to two per month. Board officials said this policy, when compared to those in the private sector, provides “the desired level of administrative simplicity, investment flexibility and security, and control over excessive trading.” Comments on the proposal are due April 9. Officials said the results will be announced in the spring.