Trump Administration Balks at Letting TSP Members Invest in China


Should the U.S. government be able to block military members and retirees from investing their TSP money overseas? A set of proposed laws and a recent op-ed from a top military official suggests it would like to.

The Thrift Savings Plan

The Thrift Savings Plan (TSP) is a retirement plan that lets federal civilian employees and military members put cash into stock market funds that invest in certain markets. There are currently four market funds that members can contribute to:

The C Fund - Invests member's money into the Standard and Poor's 500 (S&P 500) Index, a mix of stocks of 500 large to medium-sized U.S. companies.

The S Fund - Invests in smaller U.S. companies that aren't in the S&P 500.

The F Fund - Invests in corporate and government bonds

The I Fund - Invests in international stock markets.

The big fuss is about the I fund. The Federal Retirement Thrift Investment Board, an independent government agency, wants to expand the I fund to include Canadian and Chinese companies. They say that expanding investment options can lead to larger returns for TSP participants, and truly represent a "global market.”

The reformatted I fund would invest about 7.5% of its assets in China. Currently the I fund has nearly $40 billion in assets. That means the new investment strategy would shift to China around $3 billion in federal employee and military member investments.

Administration and GOP Lawmakers Express Concern

While the White House has made no statement on the switch of investments, some high-profile lawmakers and political appointees have.

On May 22, Rep. Jim Banks (R-IN) introduced HR Bill 2903 - Blocking Investment In Our Adversaries Act. That bill seeks 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." Currently that bill has seven GOP co-sponsors, but no action has been taken on it.

On Aug. 26, Sens. Marco Rubio (R-FL) and Jeanne Shaheen (D-NH) sent a letter to Michael Kennedy, chairman of the TSP board, urging the board to reverse its reinvestment decision. The letter said, "it is our responsibility to … public servants to ensure that their savings do not undermine the American interests for which they serve."

And, just last week, Secretary of the Navy, Richard V. Spencer wrote an opinion article in The Wall Street Journal where he argued against investing federal employee and military members' money in China. Citing both national security and human rights issues, Spencer called it the wrong thing to do.

Apparently the Navy secretary knows a bit about investing. Before serving in his current role, he worked for 16 years on Wall Street, including running a private investment firm in Wyoming known as Crossroads Investing, working for Intercontinental Exchange, Inc., an international commodity futures exchange, and serving on the board of directors for several companies that did business internationally.

Despite the proposals and arguments against the plan, no official action has been taken as of yet. The change to include Chinese stocks in the International fund is still scheduled to happen by the end of the year.

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