The most popular fund in the Thrift Savings Plan would become “virtually worthless” as an investment option under a proposal in the House budget, a TSP spokeswoman said.

The budget plan, up for floor voting this week, assumes a change in the way money in the government securities fund, or G Fund, is invested that would sharply drop its rate of return.

The fund is a special offering in the TSP, the 401(k)-style retirement savings plan for federal employees and military personnel. The money is invested in a mix of Treasury securities that yields returns higher than that of short-term bonds, but with none of the risk of investing in longer-term bonds from losing principal if interest rates go up.

A report from the House Budget Committee says: “Securities within the G Fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. Government. Yet the interest rate paid is equivalent to a long-term bond. As a result, those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security.”

It projects that dropping the interest rate the G Fund pays to match short-term rates could save up to $32 billion over 10 years.

The fund paid 0.18 percent in February, with a return over the last 12 months of 2.22 percent—well above returns for other short-term forms of investment whose returns are guaranteed.

The fund is the program’s largest, holding about $194 billion of the $452 billion on investment as of February. Of the roughly 4.7 million TSP participants, more than 4.3 million invest in the fund; 43 percent of investors have their entire account in it.

“We strongly oppose this change,” TSP spokeswoman Kim Weaver said in an e-mail. She said the change would drop the fund’s monthly rate of return to 0.01 percent, which “would make the G Fund virtually worthless for TSP investors, as account growth would not keep pace with inflation.”

The TSP is an independent, self-funding agency overseen by a board that operates much like a corporation’s board of directors.

Weaver added that if such a change is enacted, the TSP likely would ask Congress to authorize a new fund, since the G Fund currently fills several roles of funds common in retirement savings plans including as a money market fund and as a stable value fund.

In addition, she said, the response by both the TSP and individual investors likely would undercut any assumed savings. The TSP would conduct an education campaign alerting participants to the change in the interest rate and would pull out money currently invested in the G Fund as part of the mixed-asset “lifecycle” funds it offers, she said.

The House plan follows the Treasury’s recent use of a financial maneuver involving the G Fund to stave off a default when the government hit its debt ceiling. While that tactic, which essentially takes the fund off the government’s books, does not directly affect investors, it upsets many of them since the fund holds their personal investments.