GOP Senators Issue a Last-Minute Demand that the TSP Delay Mutual Fund Window
With just a week before the federal government’s 401(k)-style retirement savings program begins offering mutual funds to its participants, some lawmakers warned it could lead to federal employees investing in China.
A group of six Republican senators this week urged the federal government’s 401(k)-style retirement savings program to cancel implementation of a mutual fund window over fears that it could lead to federal workers unwittingly investing in Chinese corporations.
But there is just one issue with the request: it came as the Thrift Savings Plan had already begun the transition to a new service provider that would enable the mutual fund window, and just a week before the new system and its features, which also include a mobile app and other innovations, is scheduled to come online.
Beginning June 1, TSP participants will be able to invest a portion of their retirement savings in one of at least 5,000 mutual funds, including those that are focused on environmental, social and corporate governance issues. Most elements of the TSP’s website are currently in the midst of a blackout as the transition to a new recordkeeper occurs.
In a Tuesday letter to the Federal Retirement Thrift Investment Board, which administers the TSP, Sens. Marco Rubio, R-Fl., Rick Scott, R-Fl., Josh Hawley, R-Mo., Tom Cotton, R-Ark., Roger Marshall, R-Kan., and Rob Portman, R-Ohio, urged the agency to cancel or postpone offering mutual funds to TSP participants over the possibility that those funds could include investments in “Chinese entities.”
“We write to convey urgent concern with regard to the Federal Retirement Thrift Investment Board’s decision to open a new ‘mutual fund window’ beginning next month for federal Thrift Savings Plan participants,” they wrote. “Such a move could expose billions of dollars in retirement savings of U.S. federal employees and service members to Chinese companies, including ones currently sanctioned by the U.S. government for human rights abuses and otherwise blacklisted for the threat they pose to U.S. national security.”
In 2020, the Trump administration pressured the TSP board to abandon plans to change the index upon which the international (I) fund is based, from the MSCI Europe, Australasia and Far East Index to the more comprehensive MSCI All Country World ex-U.S. Investable Market Index because the new index included Chinese investments. Rubio, Cotton, and Sen. Tommy Tuberville, R-Ala., placed a hold last month of President Biden’s nominees to serve on the TSP board, making it more difficult for them to be confirmed.
Although TSP officials demurred in the face of political pressure, they argued that it’s unfair for federal workers to be unable to invest in the same companies and market indexes as the rest of the American public. Instead, they said the Treasury Department’s Office of Foreign Assets Control should bar all Americans from making investments in companies that have been sanctioned or pose national security threats.
In their letter, the lawmakers criticized the TSP’s assertion that monitoring around 5,000 mutual funds for Chinese investments would prove “too costly,” and said at least the agency should postpone implementation until they find a way to do so.
“Given the vast number of Chinese companies implicated in this decision and the FRTIB’s past efforts to include such companies in the TSP, it is unlikely that your board would be able to ensure that the approximately 5,000 mutual funds are free of Chinese firms that pose a direct threat to American national security, enterprises implicated in Chinese Communist Party human rights abuses, or companies that otherwise lack the requisite financial transparency and fiduciary responsibility to qualify as prudent investment opportunities,” they wrote.
TSP spokeswoman Kim Weaver said that her agency will respond directly to the lawmakers but noted that the mutual fund window will be “entirely voluntary.”
“No TSP participant will be required to invest in any mutual fund,” she said.