White House Plans to Block TSP from Expanding China Investments

By on April 30, 2020 6:05 PM in Pay & Benefits with 0 Comments
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Updated: May 12, 2020 1:25 PM

Reports have surfaced that President Trump is moving quickly to stop the Thrift Savings Plan from making a change to the I Fund that would expand its investment holdings in China.

Sinclair Broadcast Group (SBG) reported that President Trump was described by a source as “incredulous” over the prospect of the TSP going forward with a planned change to its international stock fund (I Fund).

SBG described the president’s response as described by its source, writing, “‘We can’t allow this to move forward,’ the source quoted Mr. Trump as saying. ‘This needs to stop.'”

“Senior White House officials told Sinclair the effort is being undertaken with urgency, both because of fresh concerns about Chinese misconduct in its handling of the coronavirus and because of pending action by the pension fund,” wrote SBG.

The reported cause for concern on the part of the White House is that US officials believe the I Fund investments would include Chinese-held entities believed to be tied directly to the Chinese military and to China’s global intelligence apparatus.

No doubt adding to the controversy is the fact that the FRTIB board members were appointed during the Obama administration. In a press release on his recent legislation introduced to block the change to the I Fund, Congressman Michael Waltz (R-FL), highlighted the political aspect of the situation, writing, “If a group of Obama-appointed federal retirement board members have their way, members of the United States military and federal employees will inadvertently fund China’s People’s Liberation Army through their federal retirement plans…”

As to the actions the president might take to block the change from going through, SBG wrote, “While administration officials would not divulge the exact nature of the actions under review, observers agree the likeliest course of immediate action by the White House is an executive order from President Trump addressing the subject — even though administration officials concede such an order might not withstand court challenge, as TSP is governed by an independent agency. [FRTIB]”

About the Planned Change to the I Fund

The Federal Retirement Thrift Investment Board, the agency that oversees the TSP, has approved a change to the I Fund benchmark index which will allow the fund to invest in emerging markets, and this is the change that would expand the holdings in China.

Under the planned change, the I Fund’s benchmark index would track the MSCI All Country World ex-U.S. Investable Market (MSCI ACWI ex-US IMI) Index instead of its current index, the MSCI EAFI Index.

The TSP confirmed to SBG that the paperwork process has begun to implement the change.

Fighting the Proposed Change

Lawmakers on both sides of the aisle have been fighting the FRTIB on this issue for months. Several bills have been introduced in Congress to stop change to the I Fund’s benchmark index.

Senator Marco Rubio (R-FL) went so far as to ask President Trump to replace some of the FRTIB members for defying the wishes of Congress.

The FRTIB, however, has defended its position and says that the change has been studied thoroughly and is in line with what other large private sector pension plans do and even stands to bolster returns for TSP participants.

With the White House potentially getting involved in the matter though, it will be interesting to see what the ultimate outcome will be.

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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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