Rep. Jim Banks Introduces Bill to Prevent Federal Retirement Accounts from Investing in Companies from China & Russia

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WASHINGTON, May 22, 2019 | T.W. Arrighi (2025702510) | comments

Rep. Jim Banks Introduces Bill to Prevent Federal Retirement Accounts from Investing in Companies from China & Russia

Washington, D.C. - Today, Congressman Jim Banks (R-IN) introduced legislation that would prevent Thrift Savings Plan (TSP) funds from being invested in Chinese and Russian companies.  The TSP is the principal retirement plan for Federal Government employees and has a total investing power of over $550 billion.  

Said Rep. Banks, “The governments of Russia and China have a long history of malicious activity against the United States. If we are to confront the growing threats from these hostile countries, we should not be supporting their economies financially.  This common-sense legislation would prevent federal money from entering countries that are actively attempting to undermine our global leadership.

Background

In an era of near-peer competition with China and Russia, the United States must formulate a whole-of-government approach in preventing unnecessary economic support to either nation. This includes the investment strategies utilized by the TSP.

Legislation Overview

The Thrift Savings Plan (TSP)’s International Stock Index Investment Fund (I-Fund) is designed to diversify investor portfolios to include companies from outside of the United States. As written, the Thrift Savings Plan is mandated in Title 5 U.S.C. Section 8438 (b)(4) to “select an index [for the I-Fund] which is a commonly recognized index comprised of stock the aggregate market value of which is a reasonably complete representation of the international equity markets excluding the United States equity markets.” Currently, based on the chosen index, the Thrift Savings Plan’s I-Fund invests in the economies of allied nations.

However, in November 2017, the Federal Retirement Thrift Investment Board changed the I-Fund index to the MSCI ACWI Index, to be enacted in 2020, which allows the resources of the TSP to be invested in adversarial nations, principle among them China and Russia.

This bill will add the following language to Section 8438 (b)(4):

(C) The index selected by the [Federal Retirement Thrift Investment] Board under subparagraph (A) [for the International Stock Index Investment Fund (I-Fund)] may not include investments in any stock of an entity based in a peer or near-peer competitor, including China or Russia.

As a result, this bill:

  • Prevents the investment of TSP funds from being invested in China and Russia
  • Will have no impact to the current structure of the TSP
  • Forces the Investment Board to reevaluate their choice of index funds for the I-Fund to one of many that are both financial lucrative and do not support threatening economies

 

Financial Implication

This legislation will have no budget impacts. Additionally, this legislation will have no impact on the low service fees and historical high financial returns for plan participants, which makes the TSP the preeminent retirement plan for Federal government employees.

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