GovernmentExecutive.com

Two legislative provisions that would have affected the federal employee Thrift Savings Plan by urging fiduciaries to offer socially responsible investment options stalled at the committee level.

The provisions were removed from two major bills -- H.R. 180 by Rep. Barbara Lee, D-Calif., and H.R. 2347 by Rep. Barney Frank, D-Mass. -- to curb investment in companies that do business in countries supporting genocide and terror. The House will vote on both bills Tuesday morning, according to Steve Adamske, a spokesman for Frank.

Adamske said Monday that the TSP provisions were removed largely because the Financial Services Committee does not have jurisdiction over the federal retirement plan.

A provision in Lee's bill that would have required research on the TSP's holdings in companies that do business in the Darfur region of Sudan was removed in a House Financial Services Committee markup last week. The language would have required the Government Accountability Office to submit a report that contains the names of companies with such business interests, and the amount the Federal Retirement Thrift Investment Board, which oversees the TSP, invests in such companies.

Frank's measure would have urged the TSP to offer a terror-free investment option to federal workers, though it fell short of requiring such a fund. That provision was removed during a committee markup in May.

A similar bill (S. 1430) sponsored by two presidential candidates -- Sens. Sam Brownback, R-Kan., and Barack Obama, D-Ill. -- still includes a provision that would urge the terror-free investment option to be offered in the TSP. That bill sits in the Senate Banking, Housing and Urban Affairs Committee.

Another bill (S. 970), sponsored by Sen. Gordon Smith, R-Ore., would require the TSP board to report to Congress on any investment in entities that engage in business with Iran. That bill sits in the Senate Finance Committee.

In June, the board supported a motion urging Congress to oppose legislation that would impose restrictions on the TSP. Board members have expressed concern over the precedent such proposals could establish, holding that Congress' original intent in creating the plan was to shield it from political and social influence.

According to a recent analysis by consulting firm Ennis Knupp & Associates, divesting the TSP's international (I) fund, which holds $24.5 billion in assets, of non-U.S. companies conducting business in Sudan would potentially result in the annual loss of 5.1 basis points, or 51 cents per $1,000 invested. This would translate to $12.5 million in additional costs annually. Divestment also would result in a one-time transition cost of $30 million, according to the analysis.

COMMENTS

• Alfred, I must agree that, within a reasonable cost structure, having such an option would be gratifying and socially soothing. The problem I see is that we would lose the benefits of an indexed fund and our costs would have to cover a team of on-going reviewers. Say that was still feasible, then we would have to contend with ‘the cause du jour”. Such is exemplified by Senator Smith’s proposal. Let’s consider, remember when the stipulations on the contract awards for rebuilding Iraq were released to the public? Remember the controversy and outrage of some of our “allies” and treaty co-signers who were restricted from participation since they did not actively participate in our current coalition? What if someone decided to submit a bill to further punish those nations by restricting them from our TSP? Is that an unreasonable possibility? The reason the TSP is so successful for us is the “fire and forget” capabilities of an indexed fund, needing little or no management; well, that and the low costs. Any such bill as discussed in the article would eliminate both of those advantages. Heck, we can’t even get a Roth in place for a measly 10 mill. I PRAY cooler heads will prevail and those political pundits will keep their hands in their pockets and away from our future. They already removed our more profitable retirement (CSRS) and replaced it with a series of funds heavily weighted in favor of stocks; which currently have many quaking in their boots. Tip off Posted August 1, 2007 10:40 AM
• It would be nice to have the option of choosing a socially responsible investment fund within the TSP. But the procedure to determine what stays in and what goes out of the fund would be rather sticky. Still it would be nice to have an option. How about half world wide stock market index and half socially responsible investment within one mutual fund? The requirement that 1/2 be invested worldwide within one fund would dampen down any divestment costs or lack of diversity. Alfred Molison Posted July 31, 2007 11:47 AM
• There are several options for employees to chose from. I for one, am happy with the options we have. Our TSP should not be a pawn in their game. The Thrift Board is doing an excellent job, just let them do it! Patti Anderson Posted July 31, 2007 11:05 AM