The federal government officially reached its debt limit on Monday, and that means the Treasury Department had to suspend the daily reinvestment of the government securities (G) fund in the Thrift Savings Plan as part of “extraordinary measures” to avoid a default. That might sound scary to TSP investors, but TSP officials want you to rest assured that your retirement savings are safe. They issued the following statement on Wednesday:
G Fund investors remain fully protected, and G Fund earnings are fully guaranteed by the federal government. This statutory guarantee has effectively protected G Fund investors many times over the past 25 years. G Fund account balances will continue to accrue earnings and will be updated each business day, and loans and withdrawals will be unaffected.
For a deeper look at what happens to the G Fund when the government hits the debt limit, officials referred TSP participants here.
The TSP’s reassurance comes at a time when federal employees might be feeling jittery about their retirement benefits. Both House and Senate Republicans this week unveiled 2016 budget blueprints would ask federal employees to contribute more to their pensions, to help achieve savings. The resolutions both support a 50-50 split in contributions between feds and their agencies – amounting to a 6.35 percent contribution for feds. Employees currently put 0.8 percent to 4.4 percent of their paychecks toward their defined benefit, depending when they were hired.
While this is hardly a new proposal, and it is merely a plan, its chances of being enacted are higher under the Republican-controlled Congress. Still, there are several significant obstacles standing in its way, as our sister publication, National Journal, has noted and there are major differences between the House and Senate versions of the broader plan.
One of the sticking points is likely to be defense spending. Hawks including Republican Sen. John McCain of Arizona, have said they can’t support a budget that leaves in place the defense spending caps imposed by sequestration. But conservatives want to keep those caps in place. The House budget walks a thin line by officially maintaining sequestration, while raising the Pentagon’s spending levels through boosts to funds for Overseas Contingency Operations. It’s unclear if that approach will work.
What’s more clear is that while the Defense Department would make out well in the House GOP plan, military benefits could still take a hit. The proposal embraced the recommendations made by the Military Compensation and Retirement Modernization Commission earlier this year. The reforms, Budget Committee Chairman Rep. Tom Price, R-Ga., said, are “vital to sustaining the long-term fiscal health” of the military benefits.
“Under current law, if personnel compensation costs continue to grow as expected, they will inevitably crowd out critical defense spending on readiness and procurement,” Price wrote.
Military members are already concerned about their pay and benefits. New survey results from the First Command Financial Behaviors Index indicate that the 1 percent 2015 military pay raise didn’t sit well with troops and their families. Forty-two percent of respondents to the February survey said lower raises are one of the ways Defense budget cuts affect their families. That’s 14 percentage points more than in mid-2014, “making it the new top sequestration concern of military families,” First Command Financial Services Inc. said in a statement accompanying the survey results.
The monthly survey goes to about 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000, and has a margin of error of plus or minus 4.3 percent.
Veterans, meanwhile, received some positive benefits news this week. The Veterans Affairs Department on Monday announced that it is changing the way it calculates eligibility for health care benefits. The department will now look at veterans’ gross household income and deductible expenses from the previous year to decide if they qualify for medical care and to calculate co-payment responsibilities. Previously the department looked at veterans’ net worth (their income plus their assets).
The change will mean that “certain lower-income, non-service-connected veterans will have less [in] out-of-pocket costs,” VA stated. “Over a 5-year period, it is estimated that 190,000 veterans will become eligible for reduced costs of their health care services.”
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