Thrift Savings Plan Users File Lawsuit Over Inaccessible Funds

The Thrift Savings Plan (TSP), a widely utilized tax-deferred retirement savings program for military and civilian government employees, is facing a legal challenge from participants who claim to have lost access to their funds. This blog post explores the lawsuit filed by current and former service members and federal employees, highlighting the financial hardships they have endured as a result of complications arising from a system modernization effort overseen by the Federal Retirement Thrift Investment Board. With assets totaling around $800 billion, the TSP announced the launch of a new online portal a year ago to enhance cybersecurity and usability. However, the rollout was marred by glitches and user complaints regarding restricted access to funds, historical records, and customer service representatives.

The Lawsuit and Its Allegations

On June 1, a complaint seeking class-action status was filed by attorneys representing TSP participants. The plaintiffs argue that the system conversion caused them to suffer actual injuries, economic damages, and other harm. They claim that the TSP, in violation of the Federal Employee Retirement Systems Act of 1986, failed to process funds promptly, leading to participants falling behind on bills or resorting to loans while waiting for their funds. Joseph Sauder from the law firm Sauder Schelkopf, representing the plaintiffs, stated that they have received numerous contacts from affected individuals and will gather more information as the case progresses. Defendants are expected to file a motion to dismiss, followed by a ruling from the court. If the case proceeds, there will be a discovery phase before any class certification motion is filed.

Challenges with Hardship Withdrawals

The lawsuit also holds the Federal Retirement Thrift Investment Board accountable for its decision to involve contractors in TSP record-keeping. In November 2020, Accenture Federal Services and Alight Solutions were awarded the contract. The request for proposal emphasized the need for a successful transition that minimizes disruptions while ensuring participants’ confidence and trust.

However, users encountered difficulties with withdrawals, death benefits, and loans in the months following the new system’s launch. The complaint alleges that although the TSP charges fees for efficient loan and withdrawal processing, participants feel that the promised service was not delivered. The program’s lack of transparency and communication further compounded users’ frustrations. One plaintiff revealed that it took three months to receive a hardship withdrawal, during which time they had to secure a separate personal loan with interest. Another participant, a retired U.S. Army service member, alleges waiting six months for an out-of-service withdrawal of $12,000. Despite making over a dozen inquiries to the ThriftLine, the participant received a 1099 tax form for the withdrawal before actually receiving the funds.

Acknowledgment and Congressional Inquiries

The TSP acknowledged the high call volumes and challenges faced by users during the system rollout through social media and messages. Lawmakers have also expressed concerns about the program’s oversight. The Government Accountability Office is conducting an audit, expected to be completed in the early months of next year, to address user-reported issues.

The Defendants’ Response

Accenture Federal Services, which operates the ThriftLine, acknowledged the request for comment but has yet to provide a detailed response to the lawsuit. Similarly, Alight Solutions’ spokesperson, MacKenzie Lucas, refrained from commenting further due to the company’s litigation policy. Kim Weaver, the spokesperson for the Federal Retirement Thrift Investment Board, declined to comment, citing ongoing litigation.

Conclusion

The lawsuit against the Federal Retirement Thrift Investment Board sheds light on the challenges faced by TSP participants, including restricted access to funds and delayed processing of withdrawals. The allegations underscore the need for timely and transparent services to protect the financial well-being of program users. As the case unfolds, participants hope to obtain class-action status and seek redress for the hardships they have endured. The outcome of this lawsuit could have significant implications for the management and operation of the TSP, ensuring that it meets the expectations and needs of its participants.