Don't Politicize TSP
In addition to efforts to force TSP to stop investing in companies that do business in Darfur or Iran, another bill would require TSP to offer a certain investment option to its members. The Federal Employees Responsible Investment Act (H.R. 2519), introduced by Representatives James Langevin (D–RI) and Chris Shays (R–CT) would require the TSP to offer a "corporate responsibility" investment option. According to Representative Langevin, this would be "a widely known stock index that only invests in stocks that meet strict financial and social responsibility criteria. These companies must meet standards including safe environmental practices, sound corporate governance, community involvement, and human rights worldwide."

This is the latest congressional attempt to create new TSP funds. In the last Congress, FRTIB successfully opposed legislation supported by almost 180 House Members that would have forced TSP to offer a stock index fund based on Real Estate Investment Trusts (REITs). It also opposed earlier attempts to prevent TSP from investing in companies that do business in particular countries.

The consulting firm Ennis Knupp & Associates has noted that it would be difficult to set up a "corporate responsibility" fund because of the difficulty in arriving at a consensus definition of what is and is not an acceptable business practice. The firm recommended against setting up such a fund.

Congress should leave choosing investment options to FRTIB. All of the funds in the TSP today were added only after being recommended by the FRTIB, which has a fiduciary responsibility to ensure that TSP operates solely for the benefit of federal workers. Wisely, the FRTIB has retained its exclusive focus on the retirement needs of its members, and it should continue to do so. In return, Congress should not attempt to force TSP to include any specific funds.

Conclusion
TSP is one of the most successful retirement investment vehicles ever created. In a large part, it has succeeded because its governing board considers only its members' need to build adequate retirement savings. As a result, federal employees today can have full confidence that their interests will come before whatever political winds are currently blowing in Washington.

Auto-enrollment, a policy recommended by that governing board, is one of the most effective ways to ensure that employees can adequately save for their retirements, and Congress should add this feature to TSP. At the same time, Congress should change TSP's automatic investment choice from the G Fund to the L Fund. Both changes are in the best interest of federal workers and will especially help those who need to save the most: younger workers, lower income workers, women, and minorities.

Congress should also resist attempts to use that legislation to modify TSP's investment choices. While there are good reasons to be concerned about Sudan and Iran, TSP is simply the wrong place to take action against those regimes. Similarly, Congress should avoid forcing the FRTIB to add any funds, regardless of whether they are ethical investment funds, sector funds (e.g., REIT funds), or any other choices that FRTIB has not requested.

The risk of injecting politics into TSP is that its focus will begin to shift from the needs of its members to short-term political goals and the agendas of particular industries or interest groups. Such a step would eventually lead to efforts to force TSP to invest in politically approved projects that do not earn adequate returns. Many state and local government employee retirement plans have been forced to make investments for political reasons, and most of them have sustained serious losses as a result. Retirement savings plans should encourage investment decisions that are solely in the best financial interest of retirees, not based on political or social goals, no matter how well-intended.

David C. John is Senior Research Fellow in Retirement Security and Financial Institutions in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.