Recently introduced legislation would change the fiduciary duties of the Federal Retirement Thrift Investment Board (FRTIB), the agency tasked with managing the Thrift Savings Plan (TSP), to include national security considerations.
The bill was introduced by Senator Marco Rubio (R-FL) and is known as the TSP Fiduciary Security Act (S. 1993).
The legislation would:
- Prevent the use of the FRTIB’s fiduciary duty to justify investments that harm national security by incorporating a duty to not harm U.S. national security.
- Define as a presumptive breaches of fiduciary duty:
- Investments in Communist Chinese military companies.
- Investment in companies on the entity list.
- Proxy votes in favor of transactions that would breach contracts with the federal government, significantly reduce capital expenditures in critical technologies, or outsource critical technologies to China or other countries of national security concerns.
- Proxy votes in favor of nominees to the board of directors who are employed by any entity to which investment in would be a breach of fiduciary duty, or who propose actions for the company they are nominated to that would cause investment in the company to cause a breach of fiduciary duty.
Rubio has been steadfast in his efforts to prevent the FRTIB from making a proposed change to the underlying index tracked by the TSP’s I Fund which would include Chinese companies which he says would pose a threat to the national security of the United States with the retirement savings of federal employees. He has sent letters in opposition to the change, introduced bills to block it and even called for President Trump to remove some of the FRTIB board members.
In a statement about the bill, Rubio said:
It was incredibly shortsighted and dangerous for the Federal Retirement Thrift Investment Board to attempt to invest American civil servants’ retirement savings in companies that are tools of the Chinese Communist Party. But it was also revealing of a serious problem: the Board and their friends on Wall Street will get away with using American servicemembers’ own savings to fund threats to U.S. national security if the fiduciary duties binding these money managers only focus on short-term financial value. My legislation would update the Board’s fiduciary duty to more accurately reflect the interests of the TSP’s beneficiaries, rather than the financial interests of Wall Street.
The FRTIB has maintained that the proposed change to the I Fund is in line with what other large defined benefit plans currently offer and would not harm investment returns for the I Fund. The agency did delay its decision to move forward with the change last year.