Rubio: Biden Nominees to Federal Retiree Thrift Board Agree to No Investments in Chinese Firms

Sen. Marco Rubio (R-Fla.) speaks during a Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies hearing on Capitol Hill in Wash., on May 17, 2022. Anna Rose Layden/Pool/Getty Images

Sen. Marco Rubio (R-Fla.) announced on June 2 that President Joe Biden’s four nominees to serve on the Federal Retirement Thrift Investment Board (FRTIB) confirmed in writing their belief that Americans shouldn’t invest in Chinese firms or those of any other country that threatens U.S. national security.

“We agree that it is unfitting for Americans to invest in companies from China or elsewhere that undermine U.S. national security. Congress provided the authority to the Department of Treasury’s Office of Foreign Assets Control (OFAC) to ban any American from making such investments. We fully support OFAC’s ability to exercise its authority and we commit that any company banned by OFAC, whether based in China or elsewhere, would not be included in any TSP fund,” the nominees told Rubio and Sens. Tom Cotton (R-Ark.) and Tommy Tuberville (R-Ala.) in a June 2 letter.

The four nominees are Dana Bilyeu, Leona Bridges, Michael Gerber, and Stacie Olivares. If confirmed by the Senate, the nominees will join the five-member FRTIB. Rubio, who had previously put a hold on the nominations, said on June 2 that he has now removed his hold so the Senate can complete its consideration.

The FRTIB and its Thrift Savings Plan (TSP) is a vehicle established by a 1984 reform proposed by President Ronald Reagan to convert the federal career civil service’s main retirement program from a defined benefit plan to a defined contribution approach, such as those then being widely adopted in the corporate world.

Billions of dollars have since been invested by federal workers in the TSP, making it a potentially lucrative target for sellers of indexed investment tools made up of multiple countries from a wide variety of industries.

Last month, Rubio, Cotton, and Tuberville, joined by Sen. Roger Marshall (R-Kan.) and Sen. Rob Portman (R-Ohio), warned FRTIB Acting Chairman David Jones that the board shouldn’t implement its proposed new Mutual Fund Window in the TSP that would include multiple Chinese firms, as well as firms based in other countries that represent serious national security problems for the United States.

“U.S. service-members and other federal employees would likely be shocked to learn that the FRTIB is unaware of which companies make up these approved funds or what risk those companies pose,” the senators wrote in a May 24 letter.

“They do not want their retirement dollars to underwrite the development of the CCP’s advanced weapons systems and military modernization. They do not want to be implicated in sponsoring genocide of the Uyghur people, equipping concentration camps, and trafficking in forced labor.

“They do not want to invest in an opaque mutual fund platform in which Chinese companies do not adhere to federal securities laws or submit to adequate disclosure requirements. When they invest through TSP, they rightly expect the FRTIB will protect them and their investments from these types of dangerous investments.

“It is evident that the FRTIB cannot live up to that expectation at this time. For these, and several other reasons, we again urge the Board to cancel, or, at minimum, postpone implementation of its Mutual Fund Window initiative until your Board can ensure that no TSP funds are invested in dangerous, non-compliant or opaque Chinese securities, as well as commit to providing TSP account-holders as much transparency as possible about where their hard-earned savings are being invested.”

The statement by Biden’s four nominees suggests that the new window plan won’t be carried forward.

“We know these Chinese companies do not play by the rules,” Rubio said in his June 2 statement. “There is absolutely no reason the retirement savings of service-members and federal employees should be funding companies working with the Chinese government and military. It is encouraging that these nominees understand their fiduciary duties. I look forward to working with them to ensure retirement funds do not flow to those unaccountable companies.”

The Florida Republican, joined by Sen. Jeanne Shaheen (D-N.H.), first raised the issue in 2019 when he challenged then-FRTIB Chairman Michael Kennedy and his board “to reverse its November 2017 decision to change the Thrift Savings Plan’s International Stock Fund (TSP’s I Fund) to mirror the MSCI All Country World ex-U.S. Investable Market Index (ACWI ex-US IMI).” The senators’ challenge was contained in an Aug. 26, 2019, letter.

The MSCI Index is one of the numerous stock market investment tools used by individuals and retirement plan administrators in the private and public sectors to direct participants’ funds into selective groups of individual equities, thus, at least theoretically, spreading risks and minimizing potential losses.

Chinese firms with strong ties to the Chinese Communist Party (CCP) and the Chinese military were among those included in the MSCI Index. That worried Rubio and Shaheen, who questioned if board officials had performed sufficient due diligence concerning the many Chinese firms in the index with financial and other records that are purposely designed to conceal their activities.

Among the most prominent examples cited to Kennedy in 2019 by Rubio and Shaheen was AviChina Industry & Technology, which represents the Aviation Industry Corp. of China (AVIC) and its many subsidiaries.

The AVIC complex is controlled by the Chinese government. The entity develops “manned aircraft, unmanned aerial vehicles, missiles, and other weapons systems for the People’s Liberation Army Air Force, People’s Liberation Army Naval Air Force, and People’s Liberation Army Rocket Force,” Rubio and Shaheen told Kennedy.

The board backed off the plan to follow the MSCI Index after Rubio and Shaheen’s criticisms.