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house Bill H.R. 2903

Should Pension Funds Held for Federal Employees & Military Personnel Not Be Invested Into Chinese & Russian Companies?

Argument in favor

The retirement savings of U.S. federal employees and servicemembers shouldn’t be used to invest in companies headquartered in hostile countries. This is especially true in light of the fact that companies in China and Russia tend to have close ties to those countries’ governments. Consequently, the Thrift Savings Fund’s international investment fund, the “I Fund,” shouldn’t be allowed to invest in Chinese or Russian companies.

Paul's Opinion
···
11/10/2019
That is like investment into the enemies economy.
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11/10/2019
Does Russia have any companies? If so, do the Russian people benefit from or invest in them. Just Putin and friends. Not a place we should be investing. The same is pretty much true of China just change the names and realize the government benefits. The question is poorly worded.
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Pat's Opinion
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11/10/2019
I don’t want my TSP threatened in anyway or used to make a political statement. I’m against the current administration changing anything. I don’t trust them to manage my tsp in my best interest.
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Argument opposed

The Thrift Savings Fund’s fiduciary obligation to shareholders means that its highest responsibility is to produce the best possible returns to shareholders. Making the I Fund’s investments more diverse serves that interest and allows investors to see growth generated by companies in countries like China and Russia, despite America’s foreign policy differences with those governments.

jimK's Opinion
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11/10/2019
First off, TSP funds belong to employees of the government and do not belong to the government. The government only collects TSP funds from employee pay with some matching- just like an employee’s 401K funds belong to the employee and not to the employer. The TSP is the federal employee’s 401K plan, funded by a combination of mandatory and elective payroll withdrawals. The TSP was put in place by Reagan when he eliminated the former defined benefit retirement plan for new hires, moved former federal pension funds into the treasury, and ‘marketed’ the values of the TSP plan to entice existing employees to convert their old retirement plans. The large infusion of federal employee’s mandated and elective deposits into indexed funds had a lot to do with the growth of the stock, bond and money markets which have also increased these markets for those counting on their 401K plans. The TSP invests in products to align with well defined and broadly accepted indices, which ensures government accountability and permits participants to make rational risk-reward assessments to rebalance their TSP during the periods when this is permitted. Don’t politicize these funds in order to punish some other government. It destroys any faith that our government is acting in good faith with employee’s retirement funds, undercuts what is now a clear-cut accountability and has a significant potential side effect of damaging all of the 401K plans that many Americans are counting upon. This is one of the many things that politicians should not be mucking about with.
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burrkitty's Opinion
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11/10/2019
The people who work in TSP say no, so no. If the professionals who work with it every day say it’s a bad idea that will cause the TSP to loose money, then no. That’s our veterans savings and retirements your effing with... again.
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Sheila's Opinion
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11/10/2019
No. The pension funds for government or any company should be protected from the whims of a gambler!
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Oversight and Reform
    IntroducedMay 22nd, 2019

What is House Bill H.R. 2903?

This bill — the Blocking Investment In Our Adversaries Act — would prohibit the Thrift Savings Fund’s (TSP) International Stock Index Investment Fund (I Fund) from investing in any entity in peer or near-peer competitor nations. “Peer or near-peer competitor nations” would be defined in the National Defense Strategy, including China or Russia. The TSP is a major federal pension fund that currently invests nearly $600 billion on behalf of plan participants.

No more than 30 days after this bill’s enactment, the Federal Retirement Thrift Investment Board (FRTIB) would be required to:

  • Review whether any money in the Thrift Savings Fund is invested in peer or near-peer competitor nations;
  • Divest any money in the Thrift Savings Fund invested in peer or near-peer competitor nations; and
  • Re-invest the divested sums in investments that aren’t in peer or near-peer competitor nations.

The FRTIB would also be required to reevaluate its choice of index funds for the TSP’s I Fund. It would be required to choose a new index that is both financially lucrative and doesn’t support economies that threaten the U.S.

This bill would have no impact on the TSP’s current structure.

Impact

Federal employees; members of the military; Thrift Savings Fund (TSP); Thrift Savings Fund International Stock Index Investment Fund (I Fund); Federal Retirement Thrift Investment Board (FRTIB); TSP I Fund investments in peer or near-peer competitor nations; China; Russia; Chinese companies; and Russian companies.

Cost of House Bill H.R. 2903

A CBO cost estimate is unavailable.

More Information

In-DepthSponsoring Rep. Jim Banks (R-IN) introduced this bill to prevent the Thrift Savings Plan, a federal retirement plan, from investing in China and Russia

“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.”

The Trump administration has discussed imposing restrictions on capital flows into China, with a particular emphasis on investments made by U.S. government pension funds. According to Bloomberg, the office of Larry Kudlow, director of the White House’s National Economic Council, convened a policy-coordination committee meeting with officials from the National Security Council and the Treasury Dept. on the topic in early October.

Interpreting the October meeting as support for his bill, Rep. Banks said

“I am encouraged to see the Trump administration considering taking executive action to protect U.S. government workers from having to support the Chinese Communist Party with their retirement funds. China commits human-rights violations and threatens U.S. national security through economic and military actions every single day. We’ve been asleep at the wheel for too long, and I’m glad the U.S. is finally waking up to this threat.”

The TSP opposes this bill. In May 2019, TSP spokeswoman Kim Weaver said the agency would oppose this bill. She added: 

“It is intended, and I’m quoting, ‘to force the [Federal Retirement Thrift Investment Board] to re-evaluate its choice of index funds for the I Fund.’ I did have conversations with staff prior to its introduction, and what we’ve learned is that if the federal government, or an entity of the federal government, takes action against a foreign company, [the operator of the new investment index] would remove them from the investment index. We’ve provided that information to staff, but the bill is something that we’d likely oppose.”

This legislation has 10 Republican cosponsors


Of NoteFederal retirement plans, including the Thrift Savings Plan (TSP), invest a total of over $599.5 billion (as of July 2019) on behalf of plan participants. The TSP has four market funds that members can contribute to:

  • C Fund: Invests members’ money into the Standard & Poor’s 500 (S&P 500) Index, a mix of stocks of 500 large- to medium-sized U.S. companies
  • S Fund: Invests in smaller U.S. companies not included in the S&P 500
  • F Fund: Invests in corporate and government bonds
  • I Fund: Invests in international stock markets

On November 28, 2017, the TSP’s administrator, the Federal Retirement Thrift Investment Board (FRTIB), adopted a motion to have the Thrift Savings Plan’s international Stock Fund (“I Fund”) mirror the Morgan Stanley Capital International All Country World ex U.S. Investable Market Index. That index captures large- mid-, and small-cap representation in 22 developed markets and 26 emerging markets, including China. 

This proposal was adopted on the recommendation of Aon Hewitt Investment Consulting Inc., which advised the FRTIB to broaden the I Fund’s benchmark beyond the MSCI Europe, Australasia and the Far East Index, which excluded the U.S., Canada and China. AHIC reasoned, “inclusion of emerging markets and international small cap equities to the I fund will not hinder the ability to meet the TSP’s daily liquidity needs.” It also said that the new benchmark, the MSCI ACWI ex U.S. IMI, generates the “highest expected yield and percentage out on loan.”

At the end of October 2019, Aon presented an updated study of the I Fund benchmark proposal and recommended that the FRTIB move forward with the planned index change. In its study, Aon said that "[m]oving from the MSCI EAFE Index, which represents 58% of the international equity market, to the MSCI ACWI ex USA IMI Index, which represents 99% of the international equity market, is a more representative benchmark and better fulfills the intent" of the board's mission of serving investors by delivering strong returns.

Currently, the FRTIB plans to make the transition to the MSCI ACWI ex U.S. IMI in the second half of 2020. As currently planned, the reformatted I Fund would invest about 7.5% of its assets in China. With the I Fund’s current valuation of $40 billion, that means the new investment would shift around $3 billion to Chinese investments.

After the FRTIB’s announcement, Sens. Marco Rubio (R-FL) and Jeanne Shaheen (D-NH) sent FRTIB Chairman Michael Kennedy a letter urging the board to reverse its decision. In their August 26, 2019 letter, they argued that the move would expose nearly $50 billion in federal employees’ retirement assets to “severe and undisclosed material risks associated with many of the Chinese companies listed on this MSCI index.” They also argued that many Chinese issuers on the MSCI ACWI ex U.S. IMI “pose national security, human rights, and financial disclosure risks,” citing specific examples (AviChina Industry & Technology Ltd., China Mobile Ltd., Hangzhou Hikvision Digital Technology, ZTE Corporation, and Kangmei Pharmaceutical Co.) to back up their claims.

In a statement, Sen. Rubio called the FRTIB’s decision to invest in Chinese companies “shortsighted” and “foolish”

"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. 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."

In comments to CNBC’s “Squawk Box,” Sen. Rubio also cited concerns with Chinese securities’ opacity and Chinese companies’ tendency to be either government-backed or government-controlled: 

“There are transparency requirements you have to be able to go see the audits why because you want shareholders to be protected there’s disclosure requirements things that you want people to know about those companies the risks they’re running the decisions they’re making and how they’re being managed. We don’t have that insight when it comes to these Chinese control companies. The Chinese require all of these records to be kept in the mainland, and they block our ability, our regulators’ ability to go in and see what’s going on truly behind the scenes and so you have American investors, including federal employees through the retirement program, the TSP program, investing their hard-earned dollars for their future retirement into companies, which we have no oversight in comparison to virtually every other company … selling securities on our exchanges and our markets.”

On October 23, 2019, Secretary of the Navy Richard V. Spencer wrote an opinion article in The Wall Street Journal opposing the FRTIB’s plans. Spencer — a 16-year Wall Street veteran prior to his current role — argued that investing federal employee and military members’ money in China is wrong for both national security and human rights reasons. 

The FRTIB has responded to criticism of its plan to expand the I fund by saying that expanding investment options can yield higher returns for TSP participants and truly represent a global market.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / jxfzsy)

AKA

Blocking Investment In Our Adversaries Act

Official Title

To amend title 5, United States Code, to prohibit the International Stock Index Investment Fund of the Thrift Savings Fund from investing in any entity in peer or near-peer competitor nations as outlined in the National Defense Strategy, and for other purposes.

    That is like investment into the enemies economy.
    Like (30)
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    First off, TSP funds belong to employees of the government and do not belong to the government. The government only collects TSP funds from employee pay with some matching- just like an employee’s 401K funds belong to the employee and not to the employer. The TSP is the federal employee’s 401K plan, funded by a combination of mandatory and elective payroll withdrawals. The TSP was put in place by Reagan when he eliminated the former defined benefit retirement plan for new hires, moved former federal pension funds into the treasury, and ‘marketed’ the values of the TSP plan to entice existing employees to convert their old retirement plans. The large infusion of federal employee’s mandated and elective deposits into indexed funds had a lot to do with the growth of the stock, bond and money markets which have also increased these markets for those counting on their 401K plans. The TSP invests in products to align with well defined and broadly accepted indices, which ensures government accountability and permits participants to make rational risk-reward assessments to rebalance their TSP during the periods when this is permitted. Don’t politicize these funds in order to punish some other government. It destroys any faith that our government is acting in good faith with employee’s retirement funds, undercuts what is now a clear-cut accountability and has a significant potential side effect of damaging all of the 401K plans that many Americans are counting upon. This is one of the many things that politicians should not be mucking about with.
    Like (82)
    Follow
    Share
    The people who work in TSP say no, so no. If the professionals who work with it every day say it’s a bad idea that will cause the TSP to loose money, then no. That’s our veterans savings and retirements your effing with... again.
    Like (44)
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    Share
    No. The pension funds for government or any company should be protected from the whims of a gambler!
    Like (23)
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    Share
    Does Russia have any companies? If so, do the Russian people benefit from or invest in them. Just Putin and friends. Not a place we should be investing. The same is pretty much true of China just change the names and realize the government benefits. The question is poorly worded.
    Like (15)
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    NOPE ...
    Like (8)
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    I don’t want my TSP threatened in anyway or used to make a political statement. I’m against the current administration changing anything. I don’t trust them to manage my tsp in my best interest.
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    Seems to me that a president’s actions should also convey those priorities. If they have no desire to even question his actions why should we give them access to financial options. Also, I just don’t trust them around money.
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    Global investment is critical to being competitive in the global market.
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    We buy and trade to everyone. One day they are our enemies, the next day they are our friends, depending on which way the wind blows. Let's keep our trading going which benefits everyone and the politicians can keep playing "Let's Make a Deal" on their own time.
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    This is a good example of the conflict between globalism and nationalism. At what point do American shareholders need to be penalized for doing business with foreign governments that compromise national security? The liberal democracy of global capitalism can’t melt with economies that do not exist apart from their corresponding governments when we have to worry about potential threats from said governments. Therefore we must choose between politically disassociating with Americans who work with these foreign corporations that are intrinsically connected with governmental oversight, or we address the national security issues head on. And the best way to do the latter, which is what I want, is to expose the crimes and injustices of these countries. Alas! Doing so would also expose the question of the corrupt dealings between corporations and government here at home, so expect the spineless republicans sponsoring this bill to favor the former option of screwing over Americans investing overseas.
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    I agree, but is there a concrete lists of these countries? I don't know where anybody stands anymore, since Trump has upended the order of who are our friends and who are our allies. I do think these funds should only be invested in "friendly" companies...once we define those.
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    This is the kind of legislation you get when nearly 1/2 of the members of the House of Representatives are millionaires. With the TSP functioning as the primary retirement plan (401k) for government employees, politicizing their retirement funds is one of the most elitist, tone-deaf, selfish, Trumpian proposals one could dream up. Risking an entire group’s future welfare to make political points — truly worthy of a Republican.
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    Investments should be done after researching which ones make the most return for the people who will receive benefits from them. Ridiculous to ferret thru all the stocks to figure out if a Russian or Chinese company is involved.
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    We need to have the best return on investment that you can have for a pension plan. We already have a problem with the pension system. The Sears bankruptcy included the sell of their debt that included their pension plan. Now the purchaser is in court asking to cancel the pension plan.
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    This should only occur after they invest in US companies.
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    The government pleaded with federal employees in the late 80’s to switch to the new TSP retirement fund. We could invest in very safe, safe and high risk world funds. We we’re told we would average 12 to 14 % on our investments. Down right lies. Now once again our law makers are attempting to strip the employees of their retirement choices in investments. Why isn’t congress subject to this sane retirement system. A regular federal employees has to invest his money’s and take the risk over years. Congressional members do not follow the same guidelines. Oh! They legislate, no risk even if they get voted out of office. They still receive a life time pension with no penalties. Hard to understand how Americans can trust their elected representatives.
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    I agree that we shouldn’t contribute to the economies of China and Russia, in principal. However, we do millions of dollars in trade with countries that we don’t agree with, so I don’t see how investing in the companies that we do business with is any different. As a federal employee who is invested in the TSP, I would like more options to maximize my return on investment. Please vote nay.
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    That's A Huge No
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    Using pension finds in another way to apply pressure - similar to the trade wars - which has ONLY harmed the American consumer by raising their cost of living.
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