Fedweek

Barring rapid and unexpected action to raise the national debt ceiling, the government will hit that limit next Wednesday (March 15), almost certainly resulting in financial maneuvers involving the TSP and the federal retirement trust fund. The debt ceiling has been suspended since November 2015, but when that suspension ends, to prevent a default the Treasury Department will have to invoke what it calls “extraordinary” measures–even though they have been used numerous times over many years. One is to “disinvest” the TSP’s government securities G fund, which consists of special Treasury securities. By suspending issuance of those securities the Treasury effectively takes the obligation to pay off its books temporarily. The action has no practical impact on TSP participants–G fund balances continue to accrue interest, loans and withdrawals are unaffected, and when the ceiling is raised the securities are reconstructed as if nothing had happened–but it upsets many of them nonetheless. The CBO has projected that disinvesting the G fund–which as of the end of January held about $224 billion of investments–and similarly suspending issuance of special securities in the civil service retirement fund, along with various other accounting maneuvers, would push off the need to actually raise the debt ceiling until sometime in the fall.