TSP investment fund again to be used for debt ceiling relief

May 21, 2013

The government once again plans to resort to a financial maneuver involving federal employee retirement savings pending an increase in the national debt limit.

The Treasury Department has notified Congress and the Thrift Savings Plan that because a temporary suspension of the debt limit has now expired, it expects to take actions it has used in the past, including “disinvesting” the TSP’s government securities fund, or G Fund.

The TSP is a 401(k)-style program for federal and uniformed personnel; the G Fund, one of the investment options in that program, consists of special-issue Treasury securities available only in the TSP.

As of the end of April, there was $353 billion in the TSP, with $137 billion of that in the G Fund.

In a disinvestment period the Treasury stops issuing those securities, in effect taking that debt off its books and freeing up operating money. Account balances continue to accrue earnings, and loans and withdrawals are not affected. When the period ends, the securities are reconstructed as if the suspension had not occurred.

“The G Fund is safe and participants will not be harmed as the law requires Treasury to make the G Fund and all participants completely whole when the debt limit issue is resolved,” TSP spokeswoman Kim Weaver said in an e-mail.

The maneuver has been used numerous times over the years, most recently in January. When hitting the debt limit the Treasury also commonly uses a separate maneuver involving the trust fund that pays federal retirement annuities and which similarly has no impact on benefits.

Those maneuvers and others are projected to be sufficient to carry the government into the fall before the underlying debt ceiling issue would have to be addressed again.

Correction: An earlier version of this story incorrectly reported that the Treasury Department had already out this measure into effect. The story has been corrected.


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