In a special meeting of the Federal Retirement Thrift Investment Board (FRTIB), the Board members voted to delay implementing a new index for the I Fund, the Fund in the Thrift Savings Plan (TSP) that invests in foreign equities.
FRTIB board member William (Bill) Jasien made the following motion at a special meeting of the Board held on May 13, 2020:
The FRTIB last reviewed the decision relating to the I Fund benchmark in November 2019, and since that time has been pursuing the finalization of the changes as originally voted on by the board in November of 2017. Due to the meaningful different economic environment related in large part to the impact of the global COVID-19 pandemic as well as the nomination of three new FRTIB board members, pending further study, I move that the FRTIB board delay the implementation of the I Fund benchmark change to the MSCI All Country World ex-U.S. Investable Market (MSCI ACWI ex-US IMI) Index from the MSCI EAFE index.
The motion to delay implementing the new index was adopted by the Board.
Recent news articles highlighted a controversy surrounding the change to a new index.
While the decision to make the change to a broader index was made in 2017, the decision was reconsidered after receiving a letter from Senator Marco Rubio (R-FL) and Jeanne Shaheen (D-NH) in 2019. That letter said that changing the I Fund to mirror a new benchmark index would “expose nearly $50 billion in retirement assets of federal government employees, including members of the U.S. Armed Forces, to severe and undisclosed material risks associated with many of the Chinese companies listed on this MSCI index”.
A press release from the TSP issued shortly after the meeting stated:
Due to a meaningfully different economic environment related in large part to the impact of the global COVID-19 pandemic, as well as the nomination of three new FRTIB Board Members, pending further study, the FRTIB Board is delaying the implementation of the I Fund Benchmark change to the MSCI ACWI ex-U.S. Investible Market index from the MSCI EAFE index.
FRTIB Chairman Michael Kennedy indicated the Board will work with the new nominees to ensure a smooth transition. As noted previously, the three new nominees for the FRTIB are subject to confirmation by the Senate.
Board members indicated that the TSP Board is bipartisan and that decisions impacting investments have been made in a nonpartisan manner consistent with the fiduciary responsibility of the FRTIB.
Chairman Kennedy also noted that they appreciate the support of Congress and the Administration when the Board has made significant changes through the years in creating the “world’s greatest retirement plan” and this could not have been done without their support.
