The Thrift Savings Plan (TSP) released the 2017 net administrative expense figures last week revealing that the average net expense was $0.33 per $1,000 invested (see chart below for details by fund).
“Your share of TSP average net administrative expenses is based on the size of your account balance. For example, the G Fund’s expense ratio for 2017 was .033%. Therefore, if you invested in the G Fund in 2017, earnings were reduced by 33 cents per $1,000 of your G Fund balance,” the TSP recently posted on its website.
The 2017 TSP expense ratio is slightly lower than 2016 which was 0.038%. The TSP is often noted as having the lowest fees of any 401(k)-like investment plan in the world.
TSP expenses are the cost of administering the program which include the costs of operating and maintaining the TSP’s recordkeeping system, providing participant services, and the printing and mailing of notices, statements, and publications.
According to the TSP, these expenses are paid from the forfeitures of agency or uniformed /service automatic (1%) contributions of FERS and BRS participants who leave federal service before they are vested, other forfeitures, loan fees, and — because those forfeitures are not sufficient to cover all of the TSP’s expenses — earnings on participants’ accounts. The TSP states that the effect of administrative expenses (after forfeitures) on earnings of the G, F, C, S, and I Funds is expressed as the net expense ratio of each fund. The expense ratio for a fund is calculated by taking the total administrative expenses charged to that fund during a specific period, and dividing it by that fund’s average balance for that period.
Since the Thrift Savings Plan L Funds do not have any unique administrative expenses, they do not have any additional charges. Therefore, the L Fund administrative expense ratios are weighted averages of the expense rations of the G, F, C, S, and I Funds.