Transitions to new recordkeeping platforms have been known to result in some bumps along the way—but a new lawsuit charges those overseeing and operating the federal government’s $766 billion Thrift Savings Plan (TSP) with "breaches of fiduciary duties, negligence, unjust enrichment, and breach of contract.”
Participant-plaintiffs Demetria Bridges, Greg Gregorian, Cynthia Jesse, Alvaro Rodriguez, Thomas Taylor, Thelma Watson, and Taj White are now suing defendants Accenture Federal Services (“AFS” or “Accenture”), Alight Solutions LLC (“Alight”), Ravindra Deo, Leona Bridge, Dana K. Bilyeu, Stacie Olivares, and Mike Gerber (collectively, the “FRTIB Defendants,” and together with Accenture and Alight on behalf of their actions with regard to the Federal Thrift Savings Plan, or TSP.
The suit states that the TSP website makes “multiple representations to participants and beneficiaries that the fees they are charged will be used to provide them with various benefits and services, including the timely and efficient processing of their TSP Loan and Hardship Withdrawal requests, while omitting that TSP lacked sufficient processes to do so.” Indeed, it claims that one of the representations to participants and beneficiaries on TSP’s website is that it will disburse TSP Loan proceeds within three days.
The Decision to Change
The suit notes that prior to 2022, the TSP (“under the oversight of the FRTIB and the Executive Director”), primarily managed TSP accounts in-house, “without any major, systemic issues harming TSP participants.”[i] Then in November 2020, the FRTIB and Executive Director “decided that they no longer desired to have such a hands-on role in the management of the TSP accounts and benefits, and retained two private entities (AFS and Alight) to take over recordkeeping services for the TSP.”
The suit claims that, among other things, the Board stated that it sought to retain “a single vendor [to] provid[e] recordkeeping services,” so that they could provide “a greater range of services and tools to participants.” The plaintiffs assert that the Board “…recognized that its services were not on par with the private sector and it sought ‘to provide top-tier services to participants via the new vendor that are on par with leading retirement providers, agile and adapted to trends in the defined contributions industry.’” Moreover, the Board sought to remove itself from the management of the TSP platform and to have “the vendor... own and operate all IT infrastructure, allowing it to easily adapt and scale and eliminating the need for FRTIB to invest in and maintain recordkeeping databases, application servers, and hardware.”
And beginning in June 2022, the TSP did roll out a number of new features including a mobile app and virtual assistant, the ability to sign documents electronically, a mutual fund window, and the ability for participants to complete transactions online. Those features notwithstanding, the suit states that over the subsequent eighteen months, “AFS and Alight failed to adequately prepare[ii] to take over the TSP and the FRTIB, and the Executive Director failed to oversee AFS and Alight’s work in order to ensure that they fulfilled their legal obligations owed to Class members under FERSA” (the Federal Employees’ Retirement Systems Act of 1986).
More specifically, the suit states that in May 2022, when AFS and/or Alight attempted to migrate the TSP to a new system, it ran into a “plethora of issues that resulted in a host of problems, including failing to provide Hardship Withdrawals, Non-Hardship Active Withdrawals, Out of Service Withdrawals, Death Benefits, and TSP Loan proceeds to TSP participants in accordance with the governing recordkeeping contract, FERSA, public representations to TSP participants, and their fiduciary duties.” All of this, the plaintiffs assert, was “foreseeable, avoidable, and of Defendants’ own doing.”
To the latter point, the plaintiffs claim that—despite telling TSP participants that “they would vastly improve the usability and efficiency of TSP’s system,” AFS and Alight “completely botched the migration of TSP’s services due to an array of technological and staffing shortfalls that have virtually brought the services offered by TSP to participants to a screeching halt.” And, to add insult to injury, they included quotes from Elaine Beeman, AFS’ senior managing director and civilian portfolio lead, at the Federal Retirement Thrift Investment Board’s Aug. 24 meeting, acknowledging the issues alongside an apology.
Direct and Proximate Injury
Nonetheless, in what the plaintiffs described as a “prodigious number of instances,” approved distribution requests had not been disbursed to participants “for weeks or even months”—which they say had “directly and proximately caused Plaintiffs and TSP participants to suffer actual injury, economic damages, and other injury and actual harm as described herein. In many instances, TSP’s failure to timely disburse funds to military personnel, veterans, and federal employees has forced them to procure high interest consumer loans as alternatives so they are able to pay their bills and avoid foreclosures, repossessions, and other hardships.”
“Accordingly,” they continue, “Plaintiffs on behalf of themselves and all others similarly situated, bring this action to redress Defendants’ breaches of fiduciary duties, negligence, unjust enrichment, and breach of contract, and also seek injunctive relief enjoining Defendants from their ongoing injurious conduct.”
The Injuries, Detailed
The suit then proceeds to outline in great detail (the suit is 113 pages long) the injuries suffered by each of the named plaintiffs—a sampling can be found in the footnote below,[iii] as well as multiple posts from Reddit (throughout the suit) and a podcast regarding issues with regard to the timing of distribution processing. The suit further comments that “defendants ‘can only process one [TSP Loan or Hardship Withdrawal] request at a time from the same account.’ Thus, when a TSP participant is desperately waiting to receive their Hardship Withdrawal funds, they cannot also attempt to receive a TSP Loan to cover their financial needs while the Hardship Withdrawal request is pending, or vice versa.”
The suit further states that “on information and belief, the FRTIB paid AFS and/or Alight at least $100 million in connection with the Converge transition program.” More insidiously, considering the service shortcomings alleged, that “under the terms of the Contract, AFS and/or Alight receives payments from TSP participants, via the FRTIB, based on the number of calls that come into the ThriftLine such that AFS and Alight are financially disincentivized to design a functional system or correctly process TSP Loans, Hardship Withdrawals, Non-Hardship Active Withdrawals, Out of Service Withdrawals, and Death Benefits.”
NOTE: In litigation there are always (at least) two sides to every story. However factual it may turn out to be, the initial lawsuit in any action is only one side, and one generally crafted toward a particular result. In our coverage you'll see descriptions of events qualified with statements such as “the suit says,” or “the plaintiffs allege”—and qualifiers should serve as a reminder of that reality.
[ii] The suit takes pains to outline the level of specificity of the needs and demands related to service that were contained in an RFP soliciting those services, including “that the vendor must “[f]acilitat[e] a successful transition with a minimal blackout period while retaining the confidence and trust of participants and stakeholders” and “[a]ssum[e] full contract responsibility as a result of meeting the acceptance criteria in the contract.”
[iii] The suit first notes that on July 13, 2022, Plaintiff Bridges applied for a Hardship Withdrawal from her TSP account, and was subsequently subjected to a 10% tax penalty and a deduction of that $2,000 from her TSP account. But, failing to receive those funds, somewhere around July 27 of that year, she contacted customer support to check on the status, and was told that it was in the “operations department.” So, then around August 8 she called the ThriftLine to check the status—and was told that she had been sent a check—though she received no tracking number, and got nothing other than an email/message in the TSP portal, approving her application and informing her that the money would be issued within several days. Then on or around October 21, she got a check for $1,800 (net of the 10% tax penalty). The suit goes on to claim that, “as a direct and proximate result of TSP’s delay in providing Plaintiff Bridges with the $2,000 Hardship Withdrawal amount, Plaintiff Bridges was forced to take out an interest-bearing personal loan totaling $1,500, with interest rates of approximately 2.88%”—and was thus “forced to pay 2.88% more in interest than she otherwise would have been required to pay.” In sum, that she was forced to pay interest on a loan that she would not have otherwise paid had TSP timely disbursed her financial hardship money.
Greg Gregorian requested an out-of-service withdrawal of $12,422.72 in September 2022, and despite repeated follow-up emails (to which he was first told his inquiry was directed to the “office of participant experience,” and later to the “enhanced resolution team”)—well, he got his check on March 7, 2023 (causing him to rent a storage locker to house furniture while a restoration was underway).
Cynthia Jesse, a spouse beneficiary, notified TSP of her husband’s death on August 22, faxed death certificate and paperwork a day later—called TSP a week later—and several times through mid-October with no satisfaction—finally turning to her Congresswoman for help—and, following that—got her check on November 1 (she had to pay to have the forms faxed to TSP 13 times, and racked up another $2,000 in interest, fees & taxes related to late mortgage payments that resulted).
Alvaro Rodriguez also had his loan request deducted from his account almost immediately, but did not only not get his check for some 166 days, but—adding insult to injury—got reminder notices that he missed two scheduled repayments during that time (he also had to take out another loan, at 17.75% interest on which he has paid $447.54 in interest). Thomas Taylor had to wait 120 days for his $20,800 hardship, during which time his repeated inquiries were also said to be being directed to the “operations department”—and forcing him to take out two separate loans. The check related to Thelma Watson’s $3,500 loan request didn’t show up for 134 days (and 95 calls to the TSP service line), while she made 14 payments on a loan she hadn’t actually received. Taj White apparently still hasn’t received the $498 hardship he requested in July 2022 (forcing him to pay late fees and penalties for late car insurance payments).
Additionally, the suit notes that “many TSP participants, including Plaintiff Gregorian, needed the TSP monies to cover their current living expenses. After Defendants failed to make timely payments, Plaintiff Gregorian and similarly situated TSP participants sought out other forms of income or chose not to pay for expenditures. Thus, when these participants finally received their Out of Service Withdrawal funds, weeks or months after the requests were made, they no longer needed the funds. But “[o]nce [a] withdrawal has been disbursed, [the participant] cannot return it.” Consequently, their TSP accounts will forever be reduced and they will not enjoy the long term, compounding benefits that Congress sought to provide in FERSA."