Last week, Sen. Marco Rubio (R-Fl), introduced the TSP Fiduciary Security Act (S-1993), which would amend the Federal Retirement Thrift Investment Board’s (FRTIB) fiduciary duty to include a requirement to not harm national security.
The Thrift board is an independent agency of the federal government and administers the $757.8 billion Thrift Savings Plan (TSP), the retirement system for 6.3 million federal employees and members of the uniformed services.
This bill in theory would protect national security through preventing assets that are managed by the Federal Retirement Thrift Investment Board, Washington, from being invested into Chinese companies.
In particular, the ban would be centered around investments of the TSP in Chinese military companies, companies on the U.S. Department of Commerce Entity List, as well as proxy votes by the contractual managers of the TSP that would cause companies the TSP is invested in to harm national security assets, that would “presumptively violate fiduciary duty” per this legislation.
According to Rubio, the TSP Fiduciary Security Act would:
- Prevent the use of the FRTIB’s fiduciary duty to justify investments that harm national security by incorporating a duty to not harm U.S. national security.
- Consider the following as a presumptive breaches of fiduciary duty:
– Investments in Communist Chinese military companies.
– Investment in companies on the entity list.
– Proxy votes in favor of transactions that would breach contracts with the federal government, significantly reduce capital expenditures in critical technologies, or outsource critical technologies to China or other countries of national security concerns.
– Proxy votes in favor of nominees to the board of directors who are employed by any entity to which investment in would be a breach of fiduciary duty, or who propose actions for the company they are nominated to that would cause investment in the company to cause a breach of fiduciary duty.
The proposed legislation is in line with previous efforts to ban TSP investments to funds that include China. In May 2020, The Federal Retirement Thrift Investment Board voted unanimously in May 2020 to postpone implementation of its decision to change the Thrift Savings Plan’s international (I) fund investments to include indexes that include Chinese companies.
“It was incredibly shortsighted and dangerous for the Federal Retirement Thrift Investment Board to attempt to invest American civil servants’ retirement savings in companies that are tools of the Chinese Communist Party,” Rubio said in a statement about the bill. “But it was also revealing of a serious problem: the Board and their friends on Wall Street will get away with using American servicemembers’ own savings to fund threats to U.S. national security if the fiduciary duties binding these money managers only focus on short-term financial value. My legislation would update the Board’s fiduciary duty to more accurately reflect the interests of the TSP’s beneficiaries, rather than the financial interests of Wall Street. ”
The legislation follows a series of previous efforts to ban TSP investments to funds that include China. Last month, Senator Tommy Tuberville (R-AL) put forth the Prohibiting TSP Investment in China Act (S-1665) that would ban TSP funds from being invested in any entity based in the People’s Republic of China (PRC).
In May 2020, (FRTIB) voted unanimously to postpone implementation of its decision to change the Thrift Savings Plan’s international (I) fund investments to include indexes that include Chinese companies.
Currently the board’s position still stands, and views legislation listed above as discriminatory against their participants (TSP).