GovernmentExecutive.com

Representatives of 15 major federal employee groups passed a resolution Tuesday formally opposing the addition of a Real Estate Investment Fund to the Thrift Savings Plan.

Special interest groups have been lobbying hard to get a fund dedicated to real estate as an option in the TSP's $180 billion 401(k)-style retirement savings plan for federal employees. A House bill to add a real estate choice has 148 co-sponsors.

But the Employee Thrift Advisory Council -- composed of representatives from federal employee unions including the American Federation of Government Employees, the National Treasury Employees Union and the American Postal Workers Union, and nonbargaining employee groups such as the National Active and Retired Federal Employees Association, Federally Employed Women, the Federal Managers Association and the Senior Executives Association -- came out strongly against that effort.

The council adopted a resolution that "any development of a new fund should come from an independent process developed by the plan's fiduciary that promotes the integrity of investments of federal employee retirement funds."

Council members were condemning what they see as a backdoor approach REIT lobbyists took by going to Congress instead of letting the TSP board decide on its own about the fund.

"I'm offended by the actions of the people from [the National Association of Real Estate Investment Trusts]," said Richard Brown, president of the National Federation of Federal Employees. "They went in there and politicized it."

Members of the council also said allowing a lobbying effort to succeed in establishing a new fund would set the wrong precedent.

"If this indeed was successful, to sort of use a K Street operation to add a fund, every trade association in the country would [attempt it]," said James Sauber, chairman of the council and research director at the National Association of Letter Carriers.

Council members said the ad hoc addition of numerous funds would create confusion among employees, which could cause participation rates to drop. They said simplicity in the TSP, with its five straightforward investment options and the Lifecycle funds option--which automatically diversifies investments based on a participant's age--contributes to its strong participation rates. Brown contrasted the TSP with the federal employee health insurance program, which offers dozens of options for coverage and can be baffling.

In a Feb. 6 letter to Rep. Jon Porter, R-Nev., chairman of the House Government Reform Subcommittee on the Federal Workforce and Agency Organization, Sauber wrote that there also "does not appear to be any significant demand from TSP participants for such a fund at present." He noted that the council discussed the option twice and no organization reported support from employees.

The council's resolution has no formal weight; Congress can do what it wants with it. TSP administrators already have voiced their discontent with the addition of a REIT fund, and have stalled its progress by hiring an outside consultant who will review a range of possible funds by the end of 2006. Now, though, Congress would have to move to create the fund against the will of employee stakeholders.

COMMENTS

• This is such crap. I love how the TSP board gets upset when someone tries to circumvent them because of their own ineptness. How much does one of the board directors make a year? Okay, let’s say each member is a GS-15 (I believe they are most likely SES' but lets just say they are a 15). A GS-15 step 1 makes a minimum of 103K a year, and this is for the "Rest of US" locality. Now, let me ask exactly what do they do for me? Yes they are appointed to look out for your and my best interests. I am not a financial moron. I can intelligently invest my own money. I say my own, because the TSP board seems to think it's their money. It is not! In fact, I cut and pasted the below from www.tsp.gov: The Board: "The Federal Retirement Thrift Investment Board is an independent government agency. The five members of the Board and the Executive Director are required by law to manage the TSP prudently and solely in the interest of the participants and their beneficiaries." Nullrout Posted March 10, 2006 8:34 AM
• Options are options, except for the costs. I, personally, have no problem with an additional option other than its impact on my wallet. We’ve spoken about the government’s using the G Fund. I get the feeling that industry is eyeing that $67 billion dollars also. Here we have another group anxious to get the TSP into its corner. The amount of interest is easy to see. “A House bill to add a real estate choice has 148 co-sponsors.” I ask why, if the participants are to be the only real beneficiaries? I wonder what percentage of those co-sponsors are from the real estate trade versus from TSP participants. Why are these folks pushing so hard when the vast majority of information out there is pointing to a real estate bubble? Is it largess? Is it just concern for the governmental employee’s welfare? (Please excuse the sarcasm.) I believe that an injection of any significant percentage, such as a transfer from the G Fund, would be sufficient to bolster the market, if only temporarily, and salvage a number of desperate businesses and people. Still wondering if the G Fund is a hammer or a pile driver? I’m curious as to the impact on the TSP costs should the bubble burst. Other than that: Sauber wrote that there also "does not appear to be any significant demand from TSP participants for such a fund at present." Did I miss something? I don’t remember being asked. Tip off. Tip Posted March 9, 2006 8:01 AM
• "[The] simplicity in the TSP, contributes to its strong participation rates." This is so wrong. What adds to its strong participation is the fact that employees are beginning to realize if they don't invest in this program they will not have a retirement such as what is guaranteed under the CSRS. Mike Patterson Posted March 9, 2006 9:57 AM