In recent years, environmental, social, and governance-oriented (ESG) investing has seen an upsurge. The Federal Retirement Thrift Investment Board (FRTIB) decided to join the trend last fall by investing in an index fund with some Chinese companies. Despite much criticism from some US senators, the board has announced that it is still on track with the plans.
In November 2019, the FRTIB had voted to confirm a 2017 decision to move the International Funds under the TSP to the Morgan Stanley Capital International All Country World Ex-U.S. Investable Market Index. Since the story broke, the board has been receiving criticisms from different quarters.
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Giglio also pointed out that the US government sanctioned some of the companies for undermining national security. He specifically points out China’s state-owned Aviation Industry Corporation, which supplies military aircraft to the Chinese People’s Liberation Army.
Members of the US military are also under the TSP, and it is anyone’s guess how they will react to the board using their money to strengthen the Chinese government and military.
FERS Act of 1986 established the Thrift Savings Plan (TSP), which offers five index funds to federal employees to help them prepare for retirement. It is similar to what is available in 401k plans. The index funds, which are invested in short term US Treasury securities, or national, international, or bond index funds, include:
- The Government Securities Investment (G) Fund
- The Fixed Income Index Investment (F) Fund
- The Common Stock Index Investment (C) Fund
- The Small Capitalization Stock Index (S) Fund
- International Stock Index Investment (I) Fund
Some US senators (Republicans and Democrats) have also criticized the FRTIB’s decision to shift to the new index fund. On August 26, 2019, Senator Marco Rubio (R-FL) and Senator Jeanne Shaheen (D-NH) wrote a letter to the chairman of the board, Michael Kennedy, asking the board to reconsider investing in the index fund. Like Giglio, the senators also stated that investing in Chinese companies poses a threat to the national security of the US.
The senators, joined by Senators Mitt Romney (R-UT), Kristen Gillibrand (D-NY), Rick Scott (R-FL), and Josh Hawley (R-MO), sent out another letter on October 22, 2019.
In response, the members of the FRTIB said political pressures would not influence them in deciding how to invest the funds under the TSP. They also explained that the Act that established the TSP lists the funds controlled by the board as private property.
To stop the board from going ahead with its plan, Rubio, Shaheen, and Romney introduced the Taxpayers and Savers Protection Act in November 2019, but the bill has not advanced beyond that stage.
But some stakeholders of the plan support the move to shift the I Fund. These people have urged Congress to stop trying to influence the FRTIB’s decision, stating that the plan is an independent entity. They also stated that the decision would put the TSP at par with other retirement plans. They also want Congress to drop the Taxpayers and Savers Protection bill.
The group cited a review from Aon, a British-American multinational professional services firm that first recommended investing in the index fund. According to Aon, TSP should expand to the emerging markets benchmark to risk being an oddity compared to other retirement plans.
The pandemic has also had a severe toll on TSP account balances. In December 2019, the number of millionaires under the plan was 49,620. By March 31, 2020, there had been a significant drop of over 45%, with only 27,212 participants having 1 million dollars or more in their accounts.
The highest TSP experienced a 14% decrease in value, moving from $7,395,476.29 on December 31 to $6,375,795 on March 31, 2020.
Contact Information:
Email: [email protected]
Phone: 8139269909
Bio:
For over 30-years Joe Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants. We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.
Disclosure:
Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claimsâ€paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.
