For those federal employees who may be concerned that the Thrift Savings Plan is investing in too many fossil fuel companies, legislation has recently been introduced that would give federal employees the ability to divest from the fossil fuel industry with their retirement savings.
Introduced by Congresswoman Rashida Tlaib (D-MI), the Retirement Investments for a Sustainable Economy (RISE) Act of 2020 (H.R. 8806) would offer a Climate Choice investment option for the TSP.
So what is a Climate Choice investment option? According to a press release on the legislation, it “is free from investment in fossil fuel companies, giving federal employees the flexibility and freedom to choose a more sustainable, socially responsible investment portfolio.”
Tlaib says that the bill will give federal employees the ability to “fight climate change” and “reduce the financial liability of fossil fuel asset losses.”
“Federal employees who have honorably dedicated themselves to public service deserve to have the option of divesting from corporate polluters that put their profits ahead of our planet’s future and our public health, so that they can rest easier that their retirement investments are socially responsible,” Tlaib said in a statement.
The RISE Act is companion legislation to a Senate bill introduced last year by Senator Jeff Merkley (D-OR).
Tlaib’s press release also states:
The TSP offers federal employees’ tax-deferred retirement savings and investment opportunities, similar to the benefits many private corporations offer their employees under 401(k) plans, but does not offer them any control over the types of industries in which their money is invested. As of December 2018, it has approximately 5.5 million participants with about $580 billion in assets, making it the largest defined contribution plan in the world.
As the amount of money in the TSP grows larger, the temptation for politics to creep into the management of these funds also increases. We have seen this with bills such as Tlaib’s and Merkley’s on environmental issues, and another similar type of situation that generated a lot of national attention was the fight over keeping the I Fund from investing in Chinese companies. Ultimately, the Federal Retirement Thrift Investment Board, the agency tasked with overseeing the TSP, decided to forego their planned change to the investment index tracked by the I Fund because of the political pressure surrounding the move.
Ultimately, federal employees will likely want to keep their retirement savings in the TSP as safe as possible while continuing to grow over the course of their careers to help them have a secure retirement. How that is best done is sometimes up for debate as evidenced by these types of legislative proposals. Whether or not an environmentally conscious investment option would add value to the TSP is probably also one that will continue to be debated from time to time in Congress.