Don’t panic – Why the debt limit won’t affect your TSP

The Treasury Department has stopped issuing securities to the Thrift Savings Plan\'s G Fund so the government can continue borrowing. However, Treasury will con...

By Jolie Lee
Federal News Radio

As the government reached the $14.3 trillion debt limit, the Treasury Department has stopped issuing securities to the Thrift Savings Plan’s G Fund so the government can continue borrowing.

However, Treasury will continue reinvesting the full balance of the G Fund in non-interest-bearing Treasury accounts.

Once Congress raises the debt limit, the G Fund will be made whole again.

“G Fund participants will be unaffected by this action,” said Geithner in a letter to Gregory Long, executive director of the Federal Retirement Thrift Investment Board, which oversees the Thrift Savings Plan.

The TSP website has also issued a statement to reassure participants about their G Fund.

“G Fund investments are safe and will continue, by law, to accrue earnings. The integrity of the G Fund would not be compromised,” according to the TSP website.

The FRTIB will continue its daily operations, receiving new investments, including investments into the G Fund, said Tom Trabucco, director of external affairs of FRTIB, in an interview with In Depth with Francis Rose. The Board will also continue to process loans and withdrawals, “just as we do on any other day,” Trabucco said.

When the debt ceiling is raised, the securities that replicate what would have been invested in the G Fund are issued.

“It means nothing has happened that will be detrimental in any way to G Fund investors,” Trabucco said.

The provision to make whole G Fund investments is part of the Thrift Savings Fund Investment Act of 1987.

“The G Fund account balances would be exactly the same from day to day as if they were invested in Treasury securities,” according to the TSP website. “Furthermore, disbursements of TSP loans and withdrawals would not be delayed, nor would the amounts of those payments be reduced.”

In March, Trabucco told Federal News Radio that federal employees have “no need to be anxious.”

He added that it would be “travesty” for people to take funds out of the G Fund for fear of a debt limit suspension.

Even though the government has reached the borrowing limit, Geithner said unexpected revenue and bookkeeping maneuvers will allow the Treasury to continue auctioning debt for another 11 weeks.

The government has taken similar actions in the past during “debt limit impasses,” Geithner said in the letter.

In a debt issuance suspension, Treasury is also borrowing money from the Civil Service Retirement and Disability Fund.

– The Associated Story contributed to this story.

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