If you have money invested in the Thrift Savings Plan’s G-Fund, take a bow. Your retirement nest egg is now part of a strategy to stave off worldwide financial calamity.
That’s because the Treasury Department intends to intentionally stiff the fund as one of several “extraordinary measures” announced last month to buy time after the government hit its legal $16.4 trillion debt ceiling Dec. 31.
Here’s how it works: the fund—technically known as the Government Securities Investment Fund—is continually re-invested in short-term government bonds. Because those bonds count toward the debt ceiling, Treasury suspends re-investments to free up more borrowing “headroom.” The G-Fund’s balance is currently about $156 billion, making the suspension by far the most significant of the steps now under way to delay a government default that many economists say would trigger a global panic.
The tactic is nothing new; Treasury used it during the last debt ceiling crisis in 2011. But if money is lying fallow, it’s not earning interest. The 2011 suspension temporarily cost the G-fund $378.5 million, the Government Accountability Office reported last year. But by law, the Treasury Department has to make the fund whole. In its July report, the GAO confirmed that the fund had indeed been “fully restored.”
Understandably, however, feds are nervous. In a message posted on the TSP’s web site, Executive Director Greg Long reiterated that existing law “will work to ensure that G Fund investors are completely unaffected” by Treasury’s tactics. Loans and withdrawals will not be affected, Long added.
[This post has been updated.]