Three Senators have asked President Biden’s nominees for the FRTIB for a commitment that they will ensure federal employees’ retirement savings are not invested in Chinese companies through the TSP’s I Fund.
Senators Marco Rubio (R-FL), Tommy Tuberville (R-AL), and Tom Cotton (R-AR) sent the letter to the nominees to serve on the Federal Retirement Thrift Investment Board (FRTIB), the agency which oversees the Thrift Savings Plan (TSP).
Rubio has placed a hold on all four nominations pending confirmation of their commitment not to invest money in Chinese companies working to undermine American interests and national security.
Concern Over TSP Investments in China Results in Hold on FRTIB Nominees by Senator Marco Rubio
The letter from the three Senators is requesting a commitment from the nominees to withhold investing retirement savings of military personnel and other federal employees in Chinese firms that may undermine American national security.
The letter states:
We are deeply concerned by the Federal Retirement Thrift Investment Board’s (FRTIB) history of voting to invest federal employees’ retirement savings into China-based companies, including firms involved in the Chinese government’s military, espionage, human rights abuses, and aggressive industrial policy designed to undermine U.S. industry. The FRTIB’s previous actions have demonstrated a willingness to invest American retirement savings into Chinese companies working to undermine U.S. interests and national security, as well as exposing federal employees’ retirement savings to considerable risk. This cannot be allowed in the future.
The Senators said in their letter that they are asking for the commitment from the FRTIB nominees to protect the retirement savings of federal employees. The letter specifically asked the nominees for their commitments on these questions:
- Do you commit to ensuring that the TSP’s I Fund does not mirror the MSCI All Country World ex-U.S. Investable Market Index?
- Do you commit to ensuring that no sums in the Thrift Savings Fund are invested in any security that is listed on an exchange in a jurisdiction in which the PCAOB is prevented from conducting a complete inspection or investigation of a registered public accounting firm under section 104 of the Sarbanes-Oxley Act of 2002 because of a position taken by an authority in that jurisdiction, as determined by the PCAOB?
- Do you commit to voting to ensure that no federal employee retirement funds go to any Chinese firms that undermine U.S. national security?
Previous Attempts of Senator Rubio Seeking to Prevent TSP Investments in Chinese Companies
Senator Rubio has previously made his opinion known regarding investing TSP money into Chinese companies that undermine U.S. security interests.
In 2019, he wrote a letter to President Trump taking issue with the decision of the FRTIB to alter the content of investments in the TSP’s I Fund. In the letter, Senators Rubio and Rick Scott (R-FL) wrote:
This decision by the Federal Retirement Thrift Investment Board (FRTIB) to invest the Thrift Savings Plan’s (TSP’s) international fund in an index which includes newly-registered Chinese companies ignores a previous request from Congress to act more prudently with civil servants’ savings.
Michael Kennedy, the chairman of the FRTIB at that time, came out with an editorial on the situation in which he defended the decision and responded to critics, and it was quite likely that Rubio was the primary intended audience of the article.
Kennedy said that the FRTIB was doing its fiduciary duty to the federal workforce by making the change, federal employees stand to get better returns from the alternate index, and the change puts the TSP more in line with what other large companies and government contractors are doing.
The FRTIB wrote in a letter to Rubio and several other Senators backing a bill introduced by Rubio that the FRTIB was fulfilling its fiduciary duty to TSP participants with the change. FRTIB chairman Michael Kennedy wrote, “Investing in emerging markets is not only legal but is the overwhelming choice of fiduciaries across industries and the choice of individual Americans.”
The FRTIB eventually acquiesced and ultimately abandoned the effort. It was stated at the time that the change was delayed, so nothing says changing to the new index might not happen again in the future.
The latest action by the Senators sending the letter to the FRTIB nominees indicates there is continuing concern about investments the TSP will make in China through the I Fund.
Letter From Rubio, Tuberville, and Cotton Seeking Commitment on Withholding TSP Investments in China
April 5, 2022
Dear Mr. Gerber, Ms. Bilyeu, Ms. Olivares, and Ms. Bridges:
We are deeply concerned by the Federal Retirement Thrift Investment Board’s (FRTIB) history of voting to invest federal employees’ retirement savings into China-based companies, including firms involved in the Chinese government’s military, espionage, human rights abuses, and aggressive industrial policy designed to undermine U.S. industry. The FRTIB’s previous actions have demonstrated a willingness to invest American retirement savings into Chinese companies working to undermine U.S. interests and national security, as well as exposing federal employees’ retirement savings to considerable risk. This cannot be allowed in the future.
We have repeatedly voiced our concerns with the FRTIB’s 2017 decision to change the Thrift Savings Plan’s (TSP) International Stock Fund, or the “I Fund,” to mirror the MSCI All Country World ex-U.S. Investable Market Index. In 2020, after considerable congressional pressure, the FRTIB announced that it had “deferred” the I Fund’s transition to a new benchmark index. Today, the fund continues to mirror the MSCI Europe, Australasia and Far East (EAFE) Index. Had the planned transition taken place, China would be receiving the third-most investment of any nation in the fund, potentially exposing billions of dollars in federal employee retirement assets to risks associated with many of the Chinese companies included in the index.
We write asking for your commitment to protect federal employees’ savings and the national security of the United States. In particular:
- Do you commit to ensuring that the TSP’s I Fund does not mirror the MSCI All Country World ex-U.S. Investable Market Index?
- Do you commit to ensuring that no sums in the Thrift Savings Fund are invested in any security that is listed on an exchange in a jurisdiction in which the PCAOB is prevented from conducting a complete inspection or investigation of a registered public accounting firm under section 104 of the Sarbanes-Oxley Act of 2002 because of a position taken by an authority in that jurisdiction, as determined by the PCAOB?
- Do you commit to voting to ensure that no federal employee retirement funds go to any Chinese firms that undermine U.S. national security?
We look forward to your prompt reply.
