The following FAQ outlines the risks posed by the Federal Retirement Thrift Investment Board’s (FRTIB) unconscionable plan to invest billions of dollars from the Thrift Savings Plan (TSP) — the retirement assets of federal government employees, active duty servicemembers, veterans, and retired civil servants — in companies controlled by the Chinese Communist Party (CCP).
In June, the FRTIB will allow current and former federal employees to invest up to 25% of their savings in 5,000 new mutual funds that include CCP-controlled companies, barring White House or congressional intervention. Last month, CPA called on the FRTIB to abandon this plan, calling it economic treason to invest federal retirement dollars in China.
According to research conducted by CPA, within these mutual funds are at least 32 Chinese companies that are presently non-compliant with U.S. federal securities laws and sanctioned by the U.S. government for national security and/or human rights abuses. Despite repeated requests for information, the FRTIB has failed to vet the 5,000 new mutual funds for compliance with federal securities laws, protective disclosure requirements, or if any of the funds are owned or controlled by the CCP. Additionally, the FRTIB has made clear, in publicly available meeting minutes, that it has no intention of screening these mutual funds for the presence of Chinese companies, including U.S.-sanctioned and other Chinese corporate bad actors.
Q: Why are people concerned about the TSP offering mutual funds?
A: The Federal Retirement Thrift Investment Board (FRTIB) controls the Thrift Savings Plan (TSP) – the main retirement plan for current and former government employees. The Board made a closed-door decision as to how to go about adding 5,000 mutual funds to the plan. The concern is these funds are unvetted and therefore could risk billions in retirement savings if the funds are entangled with Chinese Community Party entities.
Q: What are you asking the Biden Administration, Congress, and the FRTIB to do?
A: It is critical that people have choices in their retirement. The #NoTSP4CCP Coalition, however, is asking the Administration, Congress, and the FRTIB to halt the new TSP Mutual Fund Window, set to open in early June, until the TSP has done its due diligence to ensure no holdings are in violation of U.S. securities law, are on the U.S. sanctions list, and are not entities held by the Chinese Communist Party (CCP) or the People’s Liberation Army (PLA). It is incumbent on the TSP, not the participants – federal workers, active duty military, veterans, and retired government employees – to ensure TSP funds are safe and secure from Chinese influence.
Q: This sounds familiar? Has this been in the news before?
A: Yes! In 2019, the FRTIB tried to do the same thing, but they were stopped by Congress. In 2020, the TSP board had to halt their plans for investing in new emerging markets funds for their I Fund that would have increased exposure to China and other bad actors. This is the FRTIB’s latest attempt to put the retirement savings of millions at risk.
Q: What is FRTIB and TSP saying? That it’s safe and they’ve checked the mutual funds for exposure?
A: Nope. The new plan offers an estimated 5,000 mutual funds. Not only is the FRTIB refusing to check for exposure, they have publicly stated that doing so, “would prove too costly for the plan.”
Q: Are the current mutual funds on offer in the TSP free of Chinese entities with links to the Chinese military and human rights violators? Are they all in good standing with U.S. sanctions and U.S. securities regulations?
A: That is a good question, and is exactly our point. Right now, the TSP does not currently offer its participants a mutual fund plan. The concern is not with offering participants more options, but with U.S. taxpayer dollars funding Chinese Communist Party entities that may pose a national security risk, are committing human rights abuses, and are not in compliance with U.S. laws and regulations.
Q: What’s the alternative? That the TSP requires the mutual funds to produce binding self-certification that each fund offered is free of exposure?
A: Correct. The TSP must require its fiduciaries – BlackRock and State Street – to provide binding commitments on all funds offered, and ensure that any sanctioned or bad actor funds are removed.
Q: How many funds will be offered to TSP participants? Is there any impact by delaying to check for exposure?
A: The plan is to offer 5,000 mutual fund options. The TSP has claimed this is to diversify investment options for participants, but a few more months to ensure due diligence has been done will not impact overall investments. Any changes to the world’s largest defined contribution fund, with more than $730 billion in assets, should be transparent to the public and its participants.
Q: What type of Chinese-controlled entities are of particular concern?
A: Funds include companies that have been sanctioned for forced labor by the United States, such as KTK GROUP CO., and/or publicly traded companies selling XPCC cotton, which are barred under the Global Magnitsky Sanctions, as well as through Withhold Release Orders. This is why the plan must be halted and all funds checked.