Real Estate Investment Trusts (REITs): Considerations for the Federal Employees Thrift Savings Plan (TSP) (CRS Report for Congress)
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| Release Date |
April 24, 2006 |
| Report Number |
RL33380 |
| Report Type |
Report |
| Authors |
Mark Jickling and Barbara Miles, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
Real Estate Investment Trusts (REITs) are mutual funds made up of real estate and mortgage
assets.
In recent years, their performance has been stronger than broader market indicators, leading to calls
for inclusion of an REIT alternative in the Thrift Savings Plan (TSP) for federal workers. At
present, the TSP is limited to five savings vehicles, three of which are broad-based stock indexes.
Proponents of inclusion cite greater diversification and participant choice in the TSP as well as
potentially higher returns as benefits of the proposal. The TSP board, while studying the matter, has
argued that changes should only occur as part of a comprehensive program, should not encourage
"return chasing" by participants, and should maintain the current very low cost structure of the TSP.
H.R. 1578 , the Real Estate Investment Thrift Savings Act, was introduced April
12, 2005, to provide for an REIT option in the TSP. Hearings were held on the legislation April 19,
2005, by the House Government Reform Subcommittee on the Federal Workforce and Agency
Organization. Further hearings are scheduled for April 26, 2006. A companion bill, S. 2490 , was introduced in the Senate on April 13, 2006.
This report summarizes the legal and economic history of REITs and the factors that have
contributed to recent strong performances of REITs as investment vehicles. It then addresses the
arguments behind their possible inclusion as an investment alternative in the TSP.
This report will be updated as events warrant.
