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To: RealMuLan who wrote (20947)	1/10/2005 6:23:54 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Readers Challenge Wisdom of Using TSP as Model for Social Security Accounts By Stephen Barr Monday, January 10, 2005; Page B02 T he Diary's mailbag has been stuffed for two weeks by thoughtful readers who think the White House is mixing apples and oranges when it suggests that the Thrift Savings Plan could serve as a possible model for personal investment accounts in Social Security. Numerous readers said the two programs are unrelated and that the TSP, which relies on federal payroll systems for its basic operation, cannot be replicated on a scale as large as Social Security. Others said a column about the plan failed to stress that the TSP is a voluntary savings program that supplements Social Security, a tax-based program. "The TSP is in addition to Social Security as well as a federal pension," Robert Watson wrote. "It is merely one part of a three-part retirement system. It was never meant as a substitute for Social Security." Philip A. Robinson emphasized that "no Social Security funds are used in the TSP" and that federal workers covered by the Federal Employees Retirement System receive matching contributions from their agencies. "The example the president holds up is a darn good model. But what he and the administration and the people who support the 'privatizing' of Social Security are selling is a different package," he wrote. Several readers, including Robert L. Nelson, cited a 2002 paper written by the TSP's first executive director, Francis X. Cavanaugh, that explains why it might be difficult to adapt the TSP model to the private sector. The paper, "Feasibility of Social Security Individual Accounts," was published by the AARP Public Policy Institute. AARP is opposing Bush's plan. Cavanaugh's paper, for example, says that personal accounts in Social Security will cost more to manage than those in the TSP, in part because the TSP can rely on hundreds of federal agencies to administer payroll deductions and provide retirement planning and other services. The paper also points out that TSP operates on a progressive fee system (usually 60 cents per $1,000 account balance) so that holders of the higher account balances absorb part of the cost of maintaining smaller accounts. Such a fee system would not work in Social Security because too many accounts would be small, the paper contends. Social Security relies on the government to absorb inflation and market risks, while the TSP shifts those risks to individual investors, Cavanaugh writes. "Attempts to combine these two fundamentally different programs are like mating a bear with a bee -- somebody is going to get hurt," he concludes. E-mail: barrs@washpost.com washingtonpost.com