Connelly calls out administration interference in I-fund reversal
- By Nathan Abse
- Jun 08, 2020
The usually staid federal Thrift Savings Plan -- which controls some $500 billion-plus in federal employee retirement -- has stumbled into making unwanted news.
For months, TSP had been gearing up to offer feds a new variant of its internationally-focused funds -- or “I” funds -- potentially more focused on investing in Chinese companies. The idea is to permit more and wider varieties of retirement investments for federal employees. But, in May, just when the new fund was nearing launch, TSP’s normally neutral -- and arms-length -- parent, the Department of Labor, asked the plan’s governing board, to stop implementation. The Federal Retirement Thrift Investment Board (FRTIB) complied.
Now, however, some in Congress are decrying the DOL’s stop action -- and that the request came as a formal letter from DOL Secretary Eugene Scalia himself to FRTIB Chairman Michael Kennedy -- as political interference in the TSP’s investment activities. Scalia, for his part, justified his action by citing China’s “military activities, espionage and human rights abuses,” which U.S. investments in Chinese companies might further, as reason enough to halt the new fund. He also pointed to a “bipartisan group of Senators” that had previously expressed these concerns, unheeded. The “I” fund contains over $40 billion of fed retirees’ money, the letter noted.
Rep. Gerald E. Connolly (D-Va.), who chairs the House Subcommittee on Government Operations, begged to differ with Scalia’s rationale.
“It is clear that [the TSP board’s] announcement to defer its 2017 decision was made under mounting and inappropriate political pressure from DOL and the Trump Administration,” Connolly wrote Scalia, demanding a reversal. “In implementing this unprincipled and unprecedented policy, it appears that DOL and the Trump Administration may have violated the bipartisan Federal Employees’ Retirement System Act of 1986.” That law, Connelly wrote, “established the FRTIB as the only independent entity that has legal authority to administer and manage the TSP, the retirement savings and investment plan for federal employees and members of the uniformed services.”
“This Administration has overstepped its authority and politicized a well-established, independent board whose sole mission is to help public servants maximize their retirement savings,” Connolly wrote. “With all due respect, please keep President Trump away from the retirement plans of federal employees and servicemembers. He has done enough damage already.”
Connolly argued that Scalia should have directed his concerns to the non-political government body that exists to decide such matters: the Office of Foreign Assets Control, under the Department of Treasury. Instead it appears Scalia directly contacted the FRTIB, demanding that its members follow “orders” promulgated by the White House and the secretary of Labor -- a move Connolly objected to.
On June 5, FRTIB announced that Kennedy, had submitted a letter of resignation, effective June 30, 2020, to pursue another opportunity.
FRTIB will continue to have a quorum, the board said, and will be able to conduct necessary business. On May 4, 2020, the president sent three nominations for the board to the Senate. In the meantime, Board Member David A. Jones will serve as acting chairman until the new Board Members are confirmed by the Senate.