The controversy of the Thrift Savings Plan investing in Chinese companies is once again being targeted in new legislation.
Senator Tommy Tuberville (R-AL) has introduced the Prohibiting TSP Investment in China Act (S. 1665) which would prevent TSP funds from being invested in any entity based in China. Congressman Jim Banks (R-IN) has introduced companion legislation in the House (H.R. 3295).
The intent of the bill is to “send a message of zero tolerance towards Chinese aggression and financial manipulation” according to a press release.
Tuberville elaborated on why he feels the legislation helps to protect the retirement savings of federal employees in an op-ed published in the Wall Street Journal. He wrote:
Blocking investment of federal retirement savings in Chinese companies is good for U.S. national security and good for investors. We shouldn’t be funneling capital to firms that routinely violate U.S. sanctions laws and actively enable the Chinese Communist Party’s military expansion and persecution of religious minorities. Chinese companies have a long history of putting investors at serious risk by manipulating financial reporting statements and failing to comply with basic audit standards to artificially inflate their performance.
He added that although the Trump administration successfully blocked a planned change to the underlying index tracked by the TSP’s I Fund which would have resulted in greater Chinese investments, legislation action is needed by Congress “to provide a permanent solution, rather than relying on the whims of executive action.”
There were numerous efforts by lawmakers leading up to the delayed implementation of the TSP’s change to the I Fund to put pressure on stopping the Federal Retirement Thrift Investment Board (FRTIB) from making the change.
Senators Marco Rubio (R-FL) and Jeanne Shaheen (D-NH), for example, said that the change 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.”
The FRTIB maintained that its planned change to the I Fund was in the fiduciary interests of TSP participants and that the change to the new benchmark index was in line with what other large firms did with their 401(k) plans.
