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House panel supports addition of TSP real estate fund

Lawmakers were not swayed by the objections of the Thrift board and TSP officials.

House lamwakers showed enthusiastic and overwhelming support Tuesday for a bill that would add a sixth fund-based on real estate investment trusts-to the Thrift Savings Plan.

The Federal Retirement Thrift Investment Board announced last week that it is unanimously opposed to the plan, but that statement might mean little in the face of a determined Congress.

Last week, the bill was introduced by Rep. Chris Van Hollen, D-Md., and Rep. Jon Porter, R-Nev., the chairman of the House Government Reform Subcommittee on the Federal Workforce and Agency Organization. The bill won immediate backing from full committee Chairman Tom Davis, R-Va.

"I strongly support this effort," said Rep. Mark Foley, R-Fla., co-chairman of the Congressional Real Estate Caucus and a former real estate agent. "I would welcome the chance, personally, to have a sixth option … [the TSP] is somewhat out of step with the private sector."

The TSP-which serves as a 401(k)-style plan for federal employees-has five fund options. The Thrift Board also is developing a "life-cycle" fund, which would automatically diversify and manage a portfolio of the existing funds for government workers. The National Association of Real Estate Investment Trusts have been lobbying Congress to include a REIT-based fund in the TSP.

At a subcommittee hearing Tuesday, Thrift Board officials attempted to explain their opposition. TSP Executive Director Gary Amelio said simplicity "is the strength of this plan." Thrift Board Chairman Andrew Saul said that it is unwise to create a fund around a single industry, no matter how profitable that industry is currently perceived to be.

"The purpose of this hearing is to discuss an investment that in many ways is quite different from the existing TSP investments … this would be the wrong fund at the wrong time," Saul said. "Investment policy should not be developed one fund at a time on a case-by-case basis. Sound investment policies can only be developed in a comprehensive fashion."

But congressional enthusiasm was clear among Republicans and Democrats. Del. Eleanor Holmes Norton, D-D.C., said at first that she deferred to the experience of the Thrift Board and TSP officials. After learning that the Thrift plan has $1 billion invested in REITS through the existing C and S funds-out of a total of $155 billion-Norton suggested that the plan would have performed significantly better in the past five years if it was more heavily invested in real estate.

Porter pointed out that REITs have provided a 22 percent return since 2000, and asked why the TSP board had not acted earlier to add a REIT-based fund.

The only note of caution came from Rep. Richard Neal, D-Mass., co-chairman of the Congressional Real Estate Caucus. He supported the bill, but he reminded his fellow lawmakers of other popular and profitable investments in the past.

"I hope we don't forget the dot-coms, the Enrons, the [savings and loan] busts," Neal said.