Boon or Bust?

On Monday, House Government Reform Committee Chairman Tom Davis, R-Va., lent his considerable clout to a bill that would add a real estate investment trust option to the Thrift Savings Plan.

Davis gave his blessing to the contentious bill on Monday while appearing at a press conference with Rep. Chris Van Hollen, D-Md., and Rep. Jon Porter, R-Nev., who is chairman of the Subcommittee on Federal Workforce and Agency Organization. The TSP, a 401(k)-style plan for federal employees, has five available fund options. The bill would add a real estate investment as a sixth option.

The bill also has the backing of the National Association of Real Estate Investment Trusts, which has been lobbying on Capitol Hill for the new fund. On Monday, Davis said he is confident the legislation will pass.

There is, however, one small hiccup. The Federal Retirement Thrift Investment Board-which administers the TSP-is against the proposal and has prepared a report detailing its opposition. That study, which was sent to congressional officials early this year, suggests that the TSP would benefit from a broad study of fund options if Congress is dedicated to adding to federal workers' retirement options.

"We believe that consideration of additional funds should be more comprehensive than just one alternative," the study said. "The case for adding a REIT fund, in particular, is far less compelling than [other] presentations that have been made to the committee."

The study described the promotion of a REIT fund as "an ad hoc appraisal of individual fund recommendations."

"Several classes of assets are unrepresented by the current TSP investment options. Such asset classes include high-yield debt, inflation protected bonds, commodities, and emerging market equity," according to the study. "All of these options should be considered in addition to REIT."

NAREIT officials welcomed a study of investment options, but called for it to be conducted in an "unbiased" manner.

"We don't disagree that a study is needed," said Tony Edwards, senior VP and general counsel at NAREIT. "We are always open to discussion and analysis of the issues, to the extent that they don't reject the concept out of hand."

TSP officials also questioned the wisdom of putting investment funds into a single industry.

Edwards said that his organization does not "view real estate as the same as the biotech industry or automotive industry." He said that a real estate fund could lead to a further diversification of the TSP and more varied options for federal employees.

In a letter to congressional staff, however, TSP Executive Director Gary Amelio said he believes the TSP has the "major food groups" of investment options.