A lapse in appropriations is outside an agency's control, the court noted.

A lapse in appropriations is outside an agency's control, the court noted. David Talukdar / Getty Images

Feds Can’t Sue Over TSP Gains Lost During Shutdowns, An Appeals Court Finds

A group of FBI employees had argued they were entitled to damages, because delayed TSP contributions meant they missed out on gains from a rising stock market.

A three-judge panel on the U.S. Court of Appeals for the Third Circuit ruled this week that federal employees cannot sue the federal government to recoup market gains that they missed out on because a lapse in appropriations delayed contributions to the Thrift Savings Plan.

A group of four anonymous FBI employees sued the government, arguing they were entitled to damages because the 35-day government shutdown in 2018 and early 2019 meant, along with their pay, contributions to the TSP were delayed. Because the lapse in appropriations occurred while “the most popular [TSP] funds increased over 10%,” they missed out on those gains.

The government argued that it had not waived its sovereign immunity in this case, but a federal district court allowed the case to proceed. However, three circuit court judges, all appointed by former President Trump, disagreed on appeal.

Writing for the court, U.S. Circuit Judge Stephanos Bibas found that while the 1986 Federal Employees’ Retirement System Act allows federal employees to sue in instances when agencies do not make TSP contributions within 12 days of the end of a pay period, that does not extend to the potential gains those contributions might have produced.

“In employment, [a benefit] typically includes perks like life and health insurance, paid vacation days and pensions,” the court wrote. “Thus, here it most naturally refers only to the agency’s Thrift contribution, not damages flowing from a late contribution. The employees ask us to include the value of timely contributions as well. But that reading does not square with the text. [The statute uses] the word ‘benefit’ to refer to the agency’s contribution, not its timeliness . . . In other words, the concrete benefit due is a percentage of salaries, not the returns on that money.”

Bibas wrote that in addition, if the law allowed for federal workers to sue over missed market gains due to late contributions, that could be a double-edged sword.

“Under [the statute], the ‘benefit’ must be the thing that the suit ‘recovers,’” he wrote. “Put another way, the market growth on Thrift funds would have to be a statutory ‘benefit.’ But that would mean that if the market falls, the employee would be entitled to a smaller late payment than if it had been paid on time. So in a bear market, the government could save money by delaying its contributions. That cannot be right.”

On top of that, the judges found that any case rooted in TSP contributions that were delayed due to a government shutdown likely could not proceed, since a lapse in appropriations is a case of congressional and political inaction, outside of an agency’s control.

“Congress authorized a remedial scheme to let employees recover some lost earnings on Thrift contributions, so long as those are ‘lost earnings resulting from [agency] errors (including errors of omission),’” the court wrote. “A regulation implementing that section excludes ‘an act or omission caused by events that are beyond the control of the [Thrift Investment] Board, the [Thrift] Record Keeper, or the participant’s employing agency.’ The government shutdown stemmed not from an agency error, but from events ‘beyond the [agencies’] control.’ Congress chose not to authorize remedies for Thrift lost earnings due to those events. We must respect that choice.”