April: Rubio Places Hold on FRTIB Nominees
On April 5, 2022, three Senators sent a letter to four nominees to the Federal Retirement Thrift Investment Board (FRTIB).
The letter from Senators Rubio (R-FL), Cotton (R-AR), and Turberville (R-AL) stated:
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 asked President Biden’s nominees to the FRTIB for a commitment to ensure federal employees’ retirement savings are not invested in Chinese companies through the TSP’s I Fund.
Senator Rubio had previously argued that making the change to the I Fund 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…These return funds would have been used to fund the Chinese government and the Chinese Communist Party’s efforts to undermine U.S. economic and national security.”
Senator Rubio 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.
Nominees Commit TSP Funds Will Not Invest in Chinese Firms That Undermine U.S. National Security
On June 2, 2022, the nominees responded to the Senators’ request for their commitment in “ensuring that the TSP’s I Fund does not mirror the MSCI All Country World ex-U.S. Investable Market Index”.
The response, in part, states that a decision was previously made by the FRTIB not to change the index fund used for stocks in the I Fund of the TSP. The reason was that the recommended index invested in China-based companies. Also, the letter noted that the “acting Chair has stated in a recent letter to Senator Tuberville there are no current plans to do so.”
Additionally, the nominees’ letter stated, “we would not allow TSP funds to invest in equities based in jurisdictions that do not offer the protections of the PCAOB” (Public Company Accounting Oversight Board). As China is the only country where the PCOAB is unwelcome, “we would not permit TSP funds to invest in Chinese companies knowing TSP participant and beneficiary assets could be subject to fraud, financial irregularities or other risks.”
Rubio Press Release Announces Release of Hold on FRTIB Nominees
Senator Rubio’s office released a press release with the following headline: “Rubio Releases Hold on Federal Retirement Thrift Investment Board Nominees.” The press release stated:
We know these Chinese companies do not play by the rules. There is absolutely no reason the retirement savings of service-members and federal employees should be funding companies working with the Chinese government and military. It is encouraging that these nominees understand their fiduciary duties. I look forward to working with them to ensure retirement funds do not flow to those unaccountable companies.
Commitment Applies to I Fund Only
TSP Fund investors may want to note that the commitment from the FRTIB nominees applies to the I Fund—a core Fund of the TSP. It does not apply to the new TSP mutual fund window. A letter sent to the FRTIB by six Senators reads:
[I]t is unlikely that your Board would be able to ensure that the approximately 5,000 mutual funds are all free of Chinese firms that pose a direct threat to American national security, enterprises implicated in Chinese Communist Party (CCP) human rights abuses, or companies that otherwise lack the requisite financial transparency and fiduciary responsibility to qualify as prudent investment opportunities.
The FRTIB has previously acknowledged it will not be able to monitor investments of the 5,000 or so funds for any investments in Chinese entities as the effort “would prove too costly for the plan”.
The I Fund will not be investing in Chinese companies that may undermine American national security. There may be some funds available through the TSP window that do invest in these companies.
With the hold now being released by Senator Rubio, the chances are increased that the Senate will vote to confirm these nominees in the near future.