GovernmentExecutive.com

Treasury Department officials announced Wednesday that it would suspend daily investments in the retirement funds of federal employees to stay under the federal debt ceiling.

In a Feb. 19 letter to House and Senate leaders, Treasury Secretary John Snow said the government would stop investing billions of dollars of federal employees' money in the G Fund, the portion of the federal 401k-style Thrift Savings Plan that is normally invested in Treasury securities. The move is one of several strategies the government can use to avoid hitting the $6.4 trillion debt ceiling.

On Thursday, Acting Executive Director of the TSP Board James Petrick told TSP board members that while the move often causes "consternation" among TSP participants, it is not unusual. The government used the same maneuver three times in 1987, once in 1989 and once in 1995-1996. Last year the government twice suspended G Fund investments. A 'make-whole' provision, implemented when President Reagan signed the 1987 Thrift Savings Fund Investment Act, requires Treasury to pay back the money with interest as soon as the debt ceiling is no longer threatened.

"It has always worked," Petrick said. "Participants have always gotten all of their earnings back, with interest. In fact they are required to get it back, by law."

Nearly 3 million civilian and military participants have about $100 billion invested in the TSP, which invests the retirement savings of federal employees and military personnel in five funds: the C, S, I, F and G funds. The first four funds are invested in stocks and bonds. The G fund is invested in government securities, operating more like an interest-bearing bank account than a stock fund.

National Treasury Employees Union President Colleen Kelley was critical of Treasury's decision.

"However the administration characterizes it, this money belongs to federal employees and retirees, and it's not the administration's to use to cover the effects of bad economic policies," Kelley said. "It doesn't matter that federal law requires that G fund beneficiaries be made whole by the return to the fund of both principal and interest, Congress needs to get its economic act together so that it doesn't have to play financial games like this with other people's money."

COMMENTS

• It really bothers me that the government plays with my retirement funds in the G Fund. I would move all my money out of it except the others are losing all the money that I put into it. There is no way that an individual can verify that they got all the funds back into the TSP. It is all a shell game and the leaders in our government are wrong to do this. An outside company doing the same thing would be brought to court for it. It is really a sham that they are doing this and I hate that they look me in the face and say it is okay to do so. This administration has all the leaders keep repeating the same statements that it is okay and it is the law to replace it. They think that everyone is stupid and will believe them. If anyone doubts it, just look at the Indian Trust Funds that the government has stolen from the Indian tribes and refuses to pay back. GovExec.com reader Posted March 3, 2003 4:11 PM