TSP Fiduciary Security Act Aims to Add National Security Filter to Federal Retirement Investments

A new piece of legislation, the TSP Fiduciary Security Act of 2025, is looking to add a significant layer to how the Thrift Savings Plan (TSP)—the retirement fund for federal employees and military members—is managed. The core idea is straightforward: ensure that the money in the TSP isn't invested in ways that could undermine U.S. national security. This bill amends existing law (specifically, 5 U.S.C. § 8477) to require TSP fiduciaries—the people managing the fund—to actively prevent investments or the use of voting rights tied to those investments from harming national security, as much as possible.

Weaving Security into Savings

So, how does this actually work? First, the bill adds this national security obligation directly into the fiduciary responsibilities outlined in federal law. Think of a fiduciary duty like a legal promise to act in someone else's best interest; traditionally for retirement funds, this means focusing on financial returns. This bill adds national security to that mix for the TSP. Recognizing this is a new and potentially tricky area, the bill gives fiduciaries temporary protection from being personally sued for monetary damages specifically related to this new national security duty, but this shield expires on January 1, 2027.

Rulebook for Risk: Defining the Boundaries

To make this less abstract, the bill tasks the Secretary of Labor, working with other officials, to develop specific regulations within one year. These rules need to spell out how to judge if an investment or a shareholder vote complies with the national security mandate. The legislation even sets up some 'red flags' or presumptions of non-compliance. For instance, investing TSP funds in companies already flagged by the U.S. government as problematic (like those on the Communist Chinese military companies list or the Commerce Department's entity list, including their parents or subsidiaries) would likely be considered non-compliant. Similarly, using TSP voting power to support actions like outsourcing critical technologies to 'covered countries' (defined to include China, Russia, Iran, North Korea, and others) or electing board members with ties to flagged entities would also raise red flags. Furthermore, the bill explicitly bans investing TSP funds, via its mutual fund window, into any entity based in the People's Republic of China or its subsidiaries (amending 5 U.S.C. § 8438).

The Bottom Line for TSP Participants

If you're a federal employee or service member with a TSP account, this could mean changes down the road. Your investment options, particularly in international funds or through the mutual fund window, might become more restricted, specifically excluding companies based in China or those deemed security risks in other 'covered countries.' The goal is national security protection, but a potential side effect could be less diversification in your portfolio, which might impact long-term returns—though the actual financial outcome is impossible to predict. Fund managers will face a more complex job, balancing financial goals with these new security checks and compliance rules, which will be detailed in the forthcoming Labor Department regulations. The Secretary of Labor will also report annually to Congress on how these reviews are being conducted.