Senate Urges Diversity in TSP Offerings

Senate Democrats are urging the Federal Retirement Thrift Investment Board in Washington to give federal employees more options for investing in funds managed by various asset managers.

Their request comes ahead of plans by the TSP board to open a mutual fund window for TSP participants in the summer of 2022.

The proposed mutual fund window would open simultaneously with the board’s new contract with Accenture Federal Services, signed in November 2020.

A letter was sent to David A. Jones (board’s acting chairman) by the Senate Democrats — Cory Booker and Robert Menendez (New Jersey), Ben Ray Lujan (New Mexico), Alex Padilla (California), Sherrod Brown (Ohio), Tim Kaine (Virginia), and Jeff Merkley (Oregon). It read, “As part of this effort, we urge you to provide options for federal employees to invest in funds managed by asset managers that are ethnically, racially, and gender diverse…When it comes to their retirement assets, federal employees need the option to promote diversity on a strategic and values-based basis.”

The senators said in their letter that executive diversity is a good business practice that has been shown to improve returns, citing a 2020 McKinsey study that found companies in the top quartile for racial, ethnic, and gender diversity were more likely to have returns above their industries’ national medians.

“Given that the TSP’s present investment managers have been failing at diversity, especially at the executive level,” the senators noted, “…the mutual fund window is a significant opportunity.” “While the board manages a portion of the TSP’s funds itself, the board hires BlackRock as their primary investment manager and State Street Global Advisors as their secondary investment manager.”

In 2020, only 20% of BlackRock’s top management were female, 5% were African American, and only 3% were Hispanic. State Street’s top management consisted of 32% women, 2% African Americans, and 3% Hispanics.

The senators also cited a 2017 report from the Government Accountability Office that outlined ways that government retirement plans and other programs may improve chances for minority-owned and women-owned asset managers.

The FRTIB said five years ago that it didn’t see a mutual fund window being offered before 2020. While it didn’t rule out the possibility of offering funds managed by minority and women-owned businesses, it couldn’t guarantee which funds would be included in a future MFW because the market is always changing.

Senators stated that the board collaborated with Accenture Federal Services last fall to build tools to allow its members to search for funds managed by women and minority-owned businesses. They do, however, want to see the board do more to connect with and diversify the pool of asset managers.

They added that “more federal workers may choose to join in the TSP or boost their contributions if the board offers TSP funds specially managed by diverse asset managers.” “The board might encourage more federal workers to join the TSP and protect their pensions by responding to the public’s desire for diversity.”

The Thrift Board manages the TSP, a $774.2 billion retirement scheme for 6.4 million federal employees and uniformed service personnel.

Participants will have access to more than 5,000 mutual funds when the mutual fund window goes live, according to Kim Weaver, the board director of external relations, in an email Thursday.

“The mutual fund window will allow participants to take a portion of their TSP account and put it into a wide range of investment options, allowing them to customize their retirement portfolio,” Ms. Weaver explained. Participants will be able to incorporate a certain investing outlook into their portfolio through the mutual fund window to the extent they choose.

Ms. Weaver said, “We’re excited to answer to the senators and provide them with information about the mutual fund window.”

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Bio:
Rick Viader is a Federal Retirement Consultant that uses proven strategies to help federal employees achieve their financial goals and make sure they receive all the benefits they worked so hard to achieve.

In helping federal employees, Rick has seen the need to offer retirement plan coaching where Human Resources departments either could not or were not able to assist. For almost 14 years, Rick has specialized in using federal government benefits and retirement systems to maximize retirement incomes.

His goals are to guide federal employees to achieve their financial goals while maximizing their retirement incomes.