The Next Looming Deadline Federal Employees Should Know About

Lawmakers managed to avert a partial shutdown of the Homeland Security Department with a few days to spare. But another deadline looms that federal employees should know about.

If Congress does not raise the debt ceiling before March 16, the Treasury Department will suspend investments into federal employees’ retirement benefits to help avoid a default. The law allows the government to take “extraordinary measures” to avoid a default, including tapping into and suspending investments into the Civil Service Retirement and Disability Fund and halting the daily reinvestment of the government securities (G) fund, the most stable offering in the Thrift Savings Plan's portfolio.

As of Jan. 31, 2015, Treasury’s daily reinvestment into the TSP’s G Fund totaled $191 billion.

The law also requires the Treasury secretary to refill the coffers of the G Fund and the Civil Service Retirement and Disability Fund once the issue of the debt ceiling is resolved and to make up, in addition, for any interest lost on those investments during the suspension. So, there is no effect on federal employees and retirees, but things could get dicey if the government exhausts its wiggle room and runs out of cash.

The Congressional Budget Office estimated that Treasury will run out money in October or November, if Congress does not increase the debt ceiling before then. CBO noted that the government typically runs a large surplus in April when income taxes are due, which allows some extra time. That, as well as the extraordinary measures “should allow the Treasury to finance the government’s normal operations for several months without an increase in the debt ceiling,” the office stated in an analysis of the current situation.

But if the government's alternative financing options are exhausted, and Treasury runs low on cash before a new debt limit is agreed upon, “there could be delays in honoring checks and disruptions in the normal flow of government services,” a 1995 CBO report stated.

That has never happened. But if it did, it would have serious economic consequences and possibly result in furloughs for federal employees.

There is no clear roadmap for agencies or federal employees to follow if Uncle Sam cannot pay his bills, making the situation much less predictable than, say, a government shutdown.

In a Jan. 6, 2011, letter to then-Senate Majority Leader Harry Reid, D-Nev., then-Treasury Secretary Timothy Geithner listed the services and benefits that a default would adversely affect, including:

• Military pay and retirement benefits
• Federal civil service salaries and retirement benefits
• Veterans' benefits
• Social Security and Medicare benefits
• Payments to defense contractors

The 2014 Temporary Debt Limit Extension Act suspended the debt ceiling, which is about $18.1 trillion, through March 15, 2015. The last time the government hit the limit and Treasury tapped the G Fund was in February 2014, right before lawmakers passed the Temporary Debt Limit Extension Act. Sen. David Vitter, R-La., introduced legislation in January that would limit Treasury’s ability to tap the Civil Service Retirement and Disability Fund and G Fund to buy time to avoid a default. That bill is still in committee.

In 2011, Congress and the Obama administration had contentious fights over raising the debt limit, leading to the 2011 Budget Control Act. That law suspended the ceiling – and the battles over it – until 2013. It also created the automatic, governmentwide budget cuts known as sequestration, which began in 2013 and will return to full force on Oct. 1, 2015, unless Congress acts.

(Image via phasinphoto / Shutterstock.com)