TSP divestiture proposals stall in committee

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.