The Thrift Savings Plan doesn’t have a new board just yet, but it got another step closer this past week.
The Senate Homeland Security and Governmental Affairs heard from the president’s nominees to replace three of the long-serving members of the Federal Retirement Thrift Investment Board.
The committee will vote to advance the nominees next week.
The hearing almost turned postal — board nominee John Barger is a current member of the U.S. Postal Board of Governors and some senators took full advantage to air their ongoing concerns with the USPS — but it didn’t quite get there.
Instead, the nominated members got a few minutes to explain their vision for the TSP.
After all it was almost a year ago that a bipartisan group of lawmakers first raised concerns about the TSP’s plans to move the international fund to a new, emerging markets index that tracked Chinese securities.
Those plans grabbed the attention of the White House earlier this spring, and the president nominated new people to replace three of the long-serving members on the Federal Retirement Thrift Investment Board.
The board voted to hold off on making the I fund changes, instead choosing to defer the decision to the incoming members once they cleared Senate confirmation.
This past spring’s debate over the I fund prompted media coverage from outlets who probably have never heard of the TSP or know what the FRTIB stands for. The board itself debated its own role, which Congress established back in 1986.
Congressional Democrats accused the administration of playing politics with the TSP.
But if and when this issue resurfaces, the incoming board members should have enough expertise to pick the decision back up.
When asked, Barger offered a glowing review of Postmaster General Louis DeJoy. But beyond the postal experience, Barger chaired the Board of the Los Angeles County Employees Retirement Association (LACERA), the largest county pension fund in the country.
Christopher Burnham was treasurer for the state of Connecticut, had a few stints at the State Department.
Frank Dunlevy, who’s nominated to serve as the board’s chairman, holds multiple leadership positions at the U.S. International Development Fund, formerly known as the Overseas Private Investment Corporation.
So where do they stand on the prospect of exposing federal employee pensions to Chinese companies? Here’s what they had to say.
Barger: “I have great concerns about investing in China because of the reporting standards with Chinese firms, among other things. I spent some time in China while I was chairing the board of LACERA and had a chance to examine firsthand what the standards were that they applied. I would have concerns about that. I would want to look into the standards the Chinese are imposing on their companies and how that stacks up with the investable assets for our beneficiaries. You have to look at diversification. You have to look at the impact of diversification and whether it’s really needed to invest in China given the risk profile.
“Fundamentally though, I will be guided what I consider to be my fiduciary duty and that is a duty of care and will to the beneficiaries of the fund. Certainly part of that is having a retirement plan that is investing in companies that are safe and secure.”
Dunlevy: “Most people are unaware that you get a lot of international exposure in the S&P 500. Fifteen-to-40% of the earnings of the average S&P 500 company is from international, and somewhere between 7-and-15% is from China. So you’re getting the kind of exposure from those growth markets that you may want, but you’re getting them through the accounting standards of the United States, review by the SEC and you’re not facing this specific risk that happens when you invest in China.”
When Burnham was a legislator in Connecticut, the state legislature encountered a similar debate over whether to divest government pension plans from certain countries.
Burnham: “My fiduciary duty to the men and women of Connecticut is to make the highest return at a reasonable risk, and I continue to believe that we as fiduciaries need to look at that risk. I think it’s very risky to expand beyond what is already being offered internationally by the Thrift Savings Plan.”
So what’s next?
Sure, the I fund may come back up for debate, eventually. When it does, look for Congress to take a hand at the wheel and steer the conversation.
The acronym OMG (Oh My God) is popularly used now in modern communication. But the first noted instance of its use was actually in a letter to Winston Churchhill from Lord Fisher, a British Fleet Admiral, in which he says to Churchill, “I hear that a new order of Knighthood is on the tapis — O.M.G (Oh! My! God!)— Shower it on the Admiralty!!”