Fedweek

Reducing the rate of return in the most popular of the TSP’s offerings, the government securities G fund, received tentative consideration in the Senate as that chamber looked for funding for a highway bill (HR-3038). However, employee organizations individually and collectively strongly opposed the idea, as did the TSP itself, and the proposal is not in the bill. The G fund pays interest at roughly the rate of mid-term government bonds even though it carries none of the risk–in the form of loss of principal if interest rates go up–of investing in anything but the shortest-term government issues. Backers of the idea estimate that reducing the rate of return to make it comparable to short-term rates would save more than $30 billion a year; that was one of a number of options on a list of possible funding sources for the highway bill. The idea first was raised earlier this year as part of a budget outline passed by the House, but then was set aside–along with a number of other proposals in that document, including increasing required retirement contributions by all employees–in a conference with the Senate.