Two U.S. senators are urging the Federal Retirement Thrift Investment Board, Washington, to reverse a 2017 decision that would expose billions in retirement assets to Chinese companies allegedly involved in human rights and espionage abuses.
Sens. Marco Rubio, R-Fla., and Jeanne Shaheen, D-N.H., sent a letter Monday to Michael Kennedy, chairman of the FRTIB, which administers the $590.8 billion Thrift Savings Plan — the retirement plan for 5.6 million federal employees and members of the uniformed services.
In the letter, the senators took issue with a November 2017 decision — recommended by Aon Hewitt Investment Consulting — to shift the TSP's I Fund Benchmark to the MSCI ACWI ex-U.S. Investable Market Index from the MSCI EAFE Index. The former index includes "many firms involved in the Chinese government's military, espionage, human rights abuses and 'Made in China 2025' industrial policy, and therefore poses fundamental questions about the board's statutory and fiduciary responsibilities to the American public servants who invest in federal retirement plans," the letter states.
As of Dec. 31, TSP's I Fund had $40.7 billion in assets.
The change in investment strategy is set for implementation next year. About 8% of the ACWI ex-U.S. IMI is made up of Chinese companies, as of July 31, according to the letter.
"The Federal Retirement Thrift Investment Board made a short-sighted — and foolish — decision to effectively fund the Chinese government and Communist Party's efforts to undermine U.S. economic and national security with the retirement savings of members of the U.S. armed services and other federal employees," Mr. Rubio said in a statement. "Many Chinese companies included in MSCI indexes are not just involved in China's military, espionage and human rights abuses, they are also state-owned or state-directed enterprises used as tools by the Communist Party to undermine American companies and workers. The Federal Retirement Thrift Investment Board should publicly reverse this decision immediately."
The senators, who also sent the letter to administration officials including Secretary of State Michael Pompeo and Treasury Secretary Steven T. Mnuchin, asked the FRTIB to answer several questions about how it reached its decision.
When asked for a comment, Kim Weaver, the board's director of external affairs, said in an email, "We have received the letter and are reviewing it."