Cutting G Fund Return Among the Options

Among the assumptions in the House version of the bill is changing the formula for calculating returns of the TSP’s government securities G fund. Currently, the fund is invested in a way that reflects a mix of securities that pays returns roughly equal to the higher rates of mid-term government bonds. However, because the money is reinvested each business day, investors are not at risk of losing principal value if interest rates go up—unlike, for example, the bond F fund, which can suffer such losses. The G fund currently is paying at an annual rate of about 2 percent. The House measure apparently assumes basing the returns on those of short-term Treasury issues, of three months; such securities are paying about 0.01 percent per month. The TSP has said it strongly opposes the idea, saying that at that rate, the G fund would not even keep up with inflation.