Trump Moves to Replace TSP Board Members, Prompting Concerns of Politicization

President Trump on Monday nominated replacements for three of the five members of the board that governs the federal government’s 401(k)-style retirement savings program, in an apparent effort to stop the Thrift Savings Plan from implementing a 2017 decision to base the international (I) fund on a broader index that includes investments in Chinese companies.

Trump submitted to the Senate the nominations of John Barger, Christopher Burnham and Frank Dunlevy to be members of the Federal Retirement Thrift Investment Board, to replace current members David Jones, Ronald McCray and Chairman Michael Kennedy. If he wishes to replace Dana Bilyeu and Bill Jasien, he must do so with the advice of the speaker of the House and the Senate majority leader.

The move comes after months of lobbying from some Republican lawmakers and groups like the Committee on the Present Danger that advocate for a more adversarial relationship with China.

The controversy stems from the TSP board’s decision to change the index upon which the I Fund is based from the MSCI Europe Australasia and Far East Index to the MSCI All Country World Ex-U.S. Investable Market Index. The new index would have investments in nearly 50 markets around the world, including Canada and China.

After the TSP board reaffirmed its decision last November, Sen. Marco Rubio, R-Fla., urged Trump to fire the board and appoint new members. And Reuters reported last month that lawmakers and former officials have continued to lobby the administration to take action to stop the index change, which is slated to take place later this year.

All three of the members Trump sought to replace voted in favor of the change to the I Fund index. FRTIB members are guaranteed terms of between two and four years, depending on how they are appointed, but they routinely serve for longer than their initial term. All five current members are serving under expired terms. The only board member who voted against the index change was Jasien. 

TSP staffers and board members have maintained that they are bound by a fiduciary responsibility to base their decisions on the best interests of participants, not political or geopolitical factors. They have noted that the proper avenue to prevent Americans from investing in objectionable companies is through the Treasury Department’s Office of Foreign Assets Control.

Clifford Dailing, national secretary-treasurer of the National Rural Letter Carriers’ Association and chairman of the Employee Thrift Advisory Council, a panel of federal employee groups that periodically consults with the TSP, said on Tuesday that he was troubled by the nominations.

“It just seems like the reaction to the [I Fund] change now is because of the White House’s displeasure with the actions of the current board,” Dailing said. “The focus has purely been wanting to change those members and simply as a retaliation for them changing the I Fund measurements for the participants of the TSP.”

In a statement last month, Rubio seemed to confirm that the White House would be taking action to stop the change to the I Fund.

"It’s outrageous that five unelected bureaucrats appointed by the previous administration have ignored bipartisan calls from Congress to reverse this short-sighted decision, and I applaud President Trump for directing his administration to take swift action preventing this from going forward,” Rubio said. “America’s investors should never be a source of wealth funding the Chinese Communist Party’s rise at the expense of our nation’s future prosperity, and the TSP Board should not force U.S. service members and federal employees to unwittingly undermine the American national security interests that they work hard every day to protect.”

Dailing said that preventing TSP participants from investing in emerging markets like China puts them at a disadvantage compared with employees of state and local governments as well as the private sector.

“If they want to limit these investments, the Office of Foreign Assets Control is a federal office that should make that decision nationwide for all participants, private and federal,” he said. “So far, we can’t get a reasonable response to [why they haven’t done that].”

Dailing said he fears the decision to replace board members in the aftermath of the I Fund decision could mark a broader politicization of the agency in violation of its fiduciary duties.

“I’m just hoping that the decision to replace members on the board is not a political reasoning to undo what another board has done because someone doesn’t like it for other reasons,” he said. “They should not use the TSP as a political response—decisions must be made in the best interests of participants.”

TSP spokeswoman Kim Weaver said the agency “looks forward to working with the nominees.”