TSP Targeted Again Over Expansion of International Fund Investments, and More

The federal government’s 401(k)-style retirement savings program is again in the crosshairs of some Republican lawmakers over officials’ decision to expand its international portfolio to include investments in China, Reuters reports.

In 2017, the Federal Retirement Thrift Investment Board voted to change the index upon which the Thrift Savings Plan’s international (I) fund is based on from the MSCI Europe, Australasia and Far East Index to the MSCI All Country World Ex-US Investable Market Index. That change, which moves the I Fund from a largely Euro-centric index to include investments in 48 countries around the world, including China and Canada, is slated for implementation later this year.

But last fall, Sens. Marco Rubio, R-Fla., and Jeanne Shaheen, D-N.H., urged the TSP to reconsider that decision, citing in part Chinese companies’ involvement in that country’s human rights abuses. The board overseeing the TSP revisited the decision, but ultimately reaffirmed it, noting that the vast majority of private sector 401(k)s include similar Chinese investments, and the agency has a fiduciary duty to its participants to make decisions that best prepare them for retirement.

Rubio subsequently sent a letter to President Trump, urging him to fire the TSP’s governing board and appoint new members.

On Tuesday, Reuters reported that a number of Republican lawmakers and former officials have been quietly lobbying the White House and Labor Secretary Eugene Scalia either to fire the board or issue an executive order blocking the index change.

“The memo [to White House Chief of Staff Mark Meadows] argued that if Trump did not act, by replacing FRTIB board members or through an executive order, his critics would claim Trump took no action to avoid ‘federal employees being compelled to invest in Chinese and Russian companies that have undisclosed material risks due to their roles in threatening our national security and abusing human rights,’” the story states.

TSP Spokeswoman Kim Weaver reiterated to Government Executive that the proper channel for blocking financial institutions from investing in a foreign company over foreign policy and national security issues is the Treasury Department’s Office of Foreign Assets Control. Blocking the TSP from making the change would put federal workers at a financial disadvantage compared with their counterparts in the private sector, she said.

“The law requires the Board to develop investment policies which provide for ‘prudent investments suitable for accumulating funds for payment of retirement income,’ ” Weaver said. “All 10 of the largest publicly traded U.S. companies, all 10 of the top federal contractors, all of the six largest target date fund providers and all 20 of the largest state pension plans invest in emerging markets, including China. The TSP would be a lagging outlier amongst retirement savings plans if it did not offer the ability to invest in Canada and emerging markets.”

In other TSP news, the plan last week announced that it would temporarily waive the requirement that a spouse’s signature on withdrawal election forms must be notarized until the end of the coronavirus pandemic.

In an interim rule published in the Federal Register on April 17, the agency noted that social distancing measures being observed across the country make getting a form notarized an undue burden on participants.

“The coronavirus pandemic has disrupted day-to-day life in an unprecedented way,” the agency wrote. “These disruptions, which include mandatory business and school closures, stay-at-home/shelter-in-place orders and quarantines have made it difficult and unsafe to have forms notarized in-person.”

Officials said that forms that require spousal consent still require that consent, and noted that an effort to falsify a spouse’s signature remains punishable by a fine or up to five years in prison.