NEW YORK (Reuters) - The group overseeing a large U.S. federal pension fund said recent legislation aimed at preventing it from investing in China-based companies will deprive its participants of a significant opportunity for retirement returns if passed.

FILE PHOTO: A Chinese flag flutters at the Tiananmen Square in Beijing, China October 25, 2019. REUTERS/Florence Lo

The legislation “discriminates against 5.8 million employees, retirees, and service members by restricting their ability to direct their money and save for their retirement,” the Federal Retirement Thrift Investment Board (FRTIB) said in a Nov. 14 letter seen by Reuters.

The FRTIB is an independent government agency that oversees the Thrift Savings Plan (TSP) retirement fund, which is similar to a private 401(k), and has around $600 billion in assets.

A bipartisan group of senators, led by Republican Marco Rubio and Democrat Jeanne Shaheen, introduced a bill on Nov. 6 that would prevent the FRTIB from shifting the benchmark its international stock investment fund tracks to one that includes, among others, Chinese-listed companies.

The senators on Friday urged the committee considering the bill to expedite it forward. That would “ensure that the retirement savings of American federal employees and members of the armed services are not invested in China-based companies, including those involved in the Chinese government’s military activities, human rights abuses and industrial policy,” they said in a letter.

An identical bill was introduced in the House of Representatives and the issue has gained traction among lawmakers at a time of high-profile trade tensions with China and efforts to limit the flow of U.S. capital to Chinese companies due to security concerns.

But as currently written, the bill would not allow the FRTIB to offer its participants any international stock index fund, because there is no international index available that meets the bill’s criteria, the agency said in the letter to the senators.

Emerging market stocks have outperformed developed markets in recent years and nearly all other major public and private pension plans offer access to them, the FRTIB said.

The FRTIB’s decision to use the MSCI All Country World ex-U.S.A. Investable Market Index, which represents 99% of the international equity market, as the benchmark for its international stock fund, came after recommendations from a consulting firm.

The fund’s current international fund benchmark represents just 58% of the international equity market, and excludes Canada, as well as emerging markets. That benchmark would not meet the requirements of the senators’ legislation either, the FRTIB said.