Another Bill Introduced to Try to Stop TSP Investments in China

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By on November 7, 2019 in Pay & Benefits with 0 Comments
Senator Marco Rubio (R-FL)
Senator Marco Rubio (R-FL)

Another bill has been introduced, this time in the Senate, to try to stop the Thrift Savings Plan from expanding its international stock holdings into Chinese companies.

The Taxpayers and Savers Protection (TSP) Act (S. 2791) was introduced by Senator Marco Rubio (R-FL). He is stepping up his efforts in this area, going from sending letters pressuring the Federal Retirement Thrift Investment Board (FRTIB) to reverse its decision to change the investment index for the TSP’s I Fund to now introducing full on legislation to block the change.

The bill would conditionally ban the investment of TSP funds in securities listed on mainland Chinese exchanges.

“Today makes clear that a bipartisan, bicameral coalition in Congress will not sit on the sidelines and allow the TSP Board to funnel the federal retirement savings of U.S. service members and federal employees to the Chinese Communist Party,” Rubio said. “America’s investors should never be a source of wealth funding Beijing’s rise at the expense of our nation’s future prosperity, and the TSP Board should not force U.S. service members and federal employees to unwittingly undermine the American national security interests that they work hard every day to protect.”

Rubio called the FRTIB’s decision to change to the new index a “short-sighted decision” in a press release on the bill. He again reiterated that he thinks the investments in Chinese companies puts federal employees and retirees at risk “by directing their savings into Chinese firms that fail to live up to the accounting and financial disclosure levels that are standard in developed markets.” On the latter point, the bill would specifically prohibit investments where America’s Public Company Accounting and Oversight Board (PCAOB) has not issued an audit inspection or is prohibited from conducting any such inspection.

Mounting Pressure to Stop I Fund Index Change

Lawmakers have been increasingly stepping up the pressure on the FRTIB over its decision to change the benchmark index for the I Fund. Rubio has sent two letters already to the FRTIB’s chairman saying that exposure to Chinese companies in the new index, the MSCI All Country World ex-U.S. Investable Market (MSCI ACWI ex-US IMI) Index, would be harmful to federal employees.

Another bill was also introduced in the House to block the change. It was introduced by Congressman Jim Banks (R-IN) and would ban the I Fund from investing in Chinese or Russian companies.

The FRTIB is not tone deaf to all of the heat it is getting from lawmakers over the change to the I Fund. It had Aon Hewitt Investment Consulting (AHIC) conduct a second review of the switch to the new benchmark index and the conclusion was the same as one done a couple of years ago: AHIC concluded that the new index would yield better returns for the I Fund and that using the alternate index was more in line with what other large defined contribution plans across the United States currently do with respect to having exposure to Chinese companies.

As of right now, the I Fund is set to begin using this new benchmark index next year. It’s unclear if the FRTIB will reverse its decision, but the pressure for it do so is mounting quickly.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.

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