TSP Participants Sue Agency Over ‘Botched’ Recordkeeper Transition
A group of seven participants in the federal government’s 401(k)-style retirement savings plan last week filed a class action lawsuit against the Thrift Savings Plan and two federal contractors over the agency’s troubled transition to a new recordkeeping vendor last year.
Last June, the TSP transitioned to a new recordkeeping system run by Accenture Financial Services, upgrading many of the back-end functions and promising new public-facing features, including a mobile app, a virtual assistant, the ability to sign documents and submit rollover checks electronically, and access to around 5,000 new investment options via a mutual fund window. Accenture partnered with another contractor, Alight, to support the new recordkeeping system.
But that changeover was plagued with glitches, as participants struggled to set up new login credentials to access their accounts online and reports that previously made beneficiary designations did not survive the transition to the new system. Exacerbating the problem was the fact that Accenture vastly underestimated the amount of requests for help via the TSP’s ThriftLine customer service center and understaffed its call centers accordingly.
By February, officials with Accenture and the TSP reported marked improvement in their service to customers. But in a lawsuit filed against the TSP, Accenture and Alight last week in U.S. District Court for the District of Columbia, seven TSP participants described even worse difficulties, including waiting months to receive funds via hardship withdrawals or loans—if they received them at all.
“Despite defendants’ public assurances, since [Accenture] and Alight became the TSP recordkeepers in 2022, TSP participants who have applied for and were approved for TSP loans have not received their funds within three days, or even three months in some cases,” the lawsuit states. “Indeed, TSP participants, including plaintiffs [Alvaro] Rodriguez and [Thelma] Watson, have reported that funds were deducted from their accounts, but they never received the proceeds.”
In the case of Rodriguez, a retired Army specialist, he requested a loan in June 2022, shortly after the transition. That loan was approved in July, at which point the TSP deducted the roughly $4,000 loan amount from his account. But he did not receive his money, despite more than a dozen calls to TSP’s ThriftLine, until Dec. 29.
“Even though plaintiff Rodriguez did not receive the TSP loan proceeds for 166 days, during that time, on Oct. 3, 2022, TSP sent a message to plaintiff Rodriguez informing him that he missed ‘two or more payments’ on the TSP loan he had not yet received. TSP stated that if plaintiff Rodriguez failed to make payments on the TSP loan, he would be placed in default.”
As a result of the six month delay in disbursing his loan, the lawsuit alleges that Rodriguez had to take out a hardship withdrawal as well as a personal loan from Navy Federal Credit Union—at a much higher interest rate—instead.
And Cynthia Jesse, the spouse of a TSP participant, alleged that following the death of her husband last August, she had to submit her husband’s death certificate and other documentation to the TSP 13 times via fax, email and the U.S. Postal Service for more than two months in order to receive death benefits. She credited the office of Delegate Eleanor Holmes Norton, D-D.C., who inquired on her behalf last November, with finally getting her benefits processed.
“It was only after Congresswoman Norton intervened that TSP finally processed plaintiff Jesse’s death benefits request the next day or two days, on or about Nov. 1, 2022,” the suit states. “As a direct and proximate result of TSP’s delays, plaintiff Jesse paid approximately $400 in postage, overnight mail, faxes, etc. that she otherwise would not have had to pay to re-send the death benefits documentation to TSP 13 times. Additionally, [she] paid approximately $2,000 in interest, fees, taxes, etc., associated with her mortgage payments that were late as a result of not receiving the death benefits. Had it not been for Congresswoman Norton and her team, she would have lost her home, after already losing her husband.”
TSP spokeswoman Kim Weaver declined to comment on the lawsuit’s allegations, citing agency policy against speaking about pending litigation.
Joseph Sauder, an attorney at one of the four law firms working together on the case, said the difficulties associated with the TSP’s recordkeeping transition had real consequences for many federal workers and retirees.
“Our clients, all of whom are current or former military members or federal employees, suffered significant financial hardship because of the Thrift Savings Plan system implementation in June 2022,” he said. “In many instances, they were simply trying to withdraw their own money from the TSP. We look forward to litigating this matter on their behalf.”
Source: GovExec.com
