A pair of last-ditch efforts were launched late last week by Republican lawmakers to try to stop the federal government’s 401k-like Thrift Savings Plan from implementing a new mutual fund window set to open on Wednesday—but neither effort is expected to stop tomorrow’s implementation of the long-planned major changes.
Beginning on June 1, TSP participants will be able to invest a portion of their retirement savings in one of at least 5,000 mutual funds, including those that are focused on environmental, social and corporate governance issues. Most elements of the TSP’s website are currently in the midst of a blackout as the transition to a new recordkeeper occurs.
The two separate efforts have two different reasons for wanting to close the mutual fund window before it even opens.
A group of six Republican senators wrote to the Federal Retirement Thrift Investment Board, which administers the TSP, urging it to cancel or at least delay implementation of the mutual fund window over fears that it could lead to federal workers unwittingly investing in Chinese corporations.
Sens. Marco Rubio (R-FL), Rick Scott (R-FL), Josh Hawley (R-MO), Tom Cotton R-AR), Roger Marshall (R-KS), and Rob Portman (R-OH), signed the May 24 letter asking the agency to cancel or postpone offering mutual funds to TSP participants “until your Board can ensure that no TSP funds are invested in dangerous, noncompliant or opaque Chinese securities,” the letter said.
“We urge the Board not to follow through with this ill-advised move,” the letter said. “Given the vast number of Chinese companies implicated in this decision and the FRTIB’s past efforts to include such companies in the TSP, it is unlikely that your Board would be able to ensure that the approximately 5,000 mutual funds are all free of Chinese firms that pose a direct threat to American national security, enterprises implicated in Chinese Communist Party (CCP) human rights abuses, or companies that otherwise lack the requisite financial transparency and fiduciary responsibility to qualify as prudent investment opportunities.”
TSP spokeswoman Kim Weaver told the Government Executive website that TSP will respond directly to the lawmakers but noted that the mutual fund window will be “entirely voluntary.”
“No TSP participant will be required to invest in any mutual fund,” Weaver said.
The full text of the letter can be read here.
Bill introduced to stop TSP investing in “woke” ESG funds
On May 27, Rep. Chip Roy (R-TX) was joined by seven Republican colleagues in the House in introducing the “No ESG at TSP Act” to prevent the federal Thrift Savings Plan (TSP) from allowing taxpayer dollars to flow into woke ESG funds.
In a statement about the bill, Roy said the No ESG at TSP Act would prohibit TSP from allowing participants to invest their retirement savings into funds that make investment decisions based on environmental, social, governance, or political criteria. His statement references the impending mutual fund window as the impetus for introducing the bill, claiming it would allow certain TSP participants to invest in ESG funds.
“ESG investing is a woke scam. It restricts the free flow of capital, undermines U.S. energy freedom to the benefit of our enemies, and advances woke racial and gender ideologies intent on dividing the republic,” Rep. Roy said of the bill. “The upcoming changes to TSP would allow billions of taxpayer dollars to serve these ends. The federal government shouldn’t have any part in this radical nonsense, and especially shouldn’t be using your money to do it.”
The bill’s cosponsors include Reps Rob Good (R-VA), Bill Johnson (R-OH), Michael Cloud (R-TX), Louie Gohmert (R-TX), Ted Budd (R-NC), Mary Miller (R-IL), and Bill Posey (R-FL).
Supporting organizations include the Texas Public Policy Foundation and Citizens for Renewing America.
The bill faces an uphill battle in the Democrat-controlled House.
Full text of the bill can be found here.
From 15 to 5,000
While TSP’s roughly 6.5 million participants have had about 15 different investment options to choose from, opening the new mutual fund window would allow participants to choose from nearly 5,000 funds offered by about 300 mutual fund companies.
The long-planned changes which many TSP participants have been seeking are outlined in a 133 page report from the FRTIB that was published in the Federal Register. It is part of an upgrade to the TSP’s operating platform that also adds new online services, security protections and a mobile app.
The FRTIB announced that the changes would take effect June 1 at its monthly meeting on May 24.
“For those of us who have been along this entire journey, it’s a really special moment,” acting board chairman David A. Jones said at the meeting, as reported by The Washington Post. “We had a vision of what the TSP should be … it’s very much in line with what our hopes were.”
The mutual fund option comes with eligibility restrictions and fees. It is available only to those with at least $40,000 in investments due to a combination of two restrictions: The initial investment through the window has to be at least $10,000, and no new investments can bring the outside share above a quarter of an account’s total.
TSP participants have been limited to three stock-index funds (the C fund, S fund and I fund) covering the large cap U.S. market, small cap stocks and an international stock fund. Participants also have a bond-index F fund and a special Treasury securities G-fund as options. Beyond that, TSP participants have also had a selection target date funds.
Participants do not have to make any changes to their TSP allocations as a result of the new mutual fund window, and would not be subject to any additional fees and administrative costs. But those that want to take a portion of their TSP account and make new investments can begin doing so Wednesday if the changes indeed take effect as expected.
The TSP is the world’s largest defined contribution plan, with roughly $740 billion invested as of the end of April.
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