Idea of TSP real estate fund gains ground on Capitol Hill
Despite opposition from the managers of the federal Thrift Savings Plan, the House Government Reform Federal Workforce Subcommittee is considering a proposal to add a real estate investment option to the 401(k)-style investment program.
TSP officials contend the new option could hurt other investments and would be costly to administer.
If the measure, which has broad, bipartisan support in the House, is enacted it would be the first time the plan had been changed by Congress over the board's objections.
"It's always been an agreeable arrangement," said a spokesman for the TSP Board. "There's only been one time [in 1996] when the Congress got involved in the addition of funds, and they did so at the board's request."
During the 108th Congress, lawmakers introduced two bills adding options to the plan, including a corporate responsibility fund and a precious metals option. Neither bill had the backing of the TSP Board -- and neither was enacted.
A spokesman for Federal Workforce Subcommittee Chairman Jon Porter, R-Nev., who co-sponsored the measure with Rep. Chris Van Hollen, D-Md., said the legislation, which has not yet been scheduled for markup, is a top priority for the panel.
He said it is a necessary step because the TSP does not give workers a broad enough range of options to ensure that their investments are protected. He added many federal workers lost money when "the big tech bubble burst." He said the real estate option has "less volatility" and is offered by many funds in the private sector.
A Van Hollen aide agreed, saying the sponsors had been approached by federal employees who requested the real estate option.
In testimony before the subcommittee last month, Gary Amelio, executive director of the Federal Retirement Thrift Investment Board, said the proposal would hurt other plan investments if Congress adds funds in a piecemeal fashion, and administering the new option could increase the costs of plan participation by as much as 10 percent.
The TSP Board spokesman would not say whether the board was communicating with any other lawmakers to block the legislation, adding, "We've made our position clear."
COMMENTS
- Ah! Yet another reason I appreciate this E-zine and its readership. Okay, last comment was on Politicos overriding Financials (even Amelio). I still have a problem with that BUT … Other comments have made me reexamine my overall position. There are different considerations for a system as a whole. The following is a brief system analyst’s point of view "L" vs. "R". Social aspect. Life-style fund. Good points - attempts to manage itself, tries to relieve participants from stress, purports to gain more for participants than the “safe” G fund but not lose as much as the stock funds. Bad points - no self-direction, national politics and finances may influence allocations, and there is NO GUARANTEED return. Social aspect. Real Estate fund. Good points – provides a possibly lucrative alternative, gives alternatives for a diversified portfolio, finite quantity, and folks got to live. Bad points - Interest rates are rising, land prices are sky high, demographic and economic shifts can and have caused the national market to devalue, the most difficult of all funds to predict. Personal view. IF costs were limited to funds based on value and participation I, too, would prefer the option of a real estate fund over a Life-style fund. The “R” fund is an option that may or may not be taken. I like options, just not costs! While many may have a preference for Big Brother (& the "L" Fund), unless he’s going to give a guaranteed return … “Thanks, but no thanks!” I, personally, prefer to roll the dice myself. Thank y’all and keep up the great work, folks!! Tip out. Tip Posted June 1, 2005 4:12 PM
- Interesting comment Tip, but to refer to Amelio as a financial manager is an insult to anyone in the financial industry. GovExec.com reader Posted May 19, 2005 7:37 AM
- Reference is made to my comment on article "Ex-TSP chief says private Social Security accounts face steep challenge" Perhaps this is a prime example of politically mandated but not fiscally sound influences that may affect a Social Security (SS) version of the TSP. Lawmaker types pushing the topic D'jour onto financial managers. Would such actions be prevented from occurring should the SS (and our general public's retirement future) go to a like system? Probably not. Food for thought ... Tip out. Tip Posted May 18, 2005 11:32 AM
