TSP board seeks to soothe debt-ceiling concerns, prevent G Fund withdrawals

Federal officials overseeing the Thrift Savings Plan say they have been pushing hard to prevent large-scale retirement plan withdrawals by federal employees since the administration decided to suspend all federal employee investments into the Government Securities Investment Fund, pending resolution of the debt ceiling crisis.

"The first reaction that I heard from some individuals that I spoke to...was that their contribution to the TSP, that they were going to change it and that they would withdrawal or reduce their amount into the G Fund," Clifford Dailing, chairman of the Employee Thrift Advisory Council, told a July 27 House panel.

"They were concerned of the government, if you will, of using their money and the issue of the debt ceiling situation and they wanted to draw that back to where they knew it was in their hands," he told the House Oversight and Government Reform's federal workforce, U.S. postal services and labor policy subcommittee.

The G Fund is a major component of the TSP, which is the defined-contribution portion of a three-legged stool on which federal workers' retirement security rests--the other legs being the defined-benefit Federal Employee Retirement System and Social Security.

Despite their fears, federal employees and retirees will not lose their G Fund investments. Shortly after the TSP was stood up in 1987, the board and Congress appropriately anticipated a similar situation because at that time there was a similar debt crisis, explained Gregory Long, executive director of the Federal Retirement Thrift Investment Board. The board pushed for legislation guaranteeing G Fund earnings, and a bill was signed by President Ronald Reagan, also in 1987.

Long said his board has tried to make this message clear through its website, emails, newsletters, agency-specific communications and in-person meetings, but noted that easing federal investors' worries is difficult.

"Despite the fact that our members who have invested in the G fund are protected, it is imperative that this information is distributed to all participants to maintain confidence in the TSP," said Dailing.

Joseph Beaudoin, president, National Active and Retired Federal Employees Association, appeared encouraged during the hearing by Long's communication efforts but was concerned about whether or not the government would make good on its retirement promises.

"We just want to ensure that once Congress raises the debt limit and the period of debt suspension ends, the treasury secretary fully complies with the federal law which requires him to make whole the retirement funds with back interest," said Beaudoin. To which Rep. Danny Davis (D-Ill.) simply repeated, "Once congress raises the debt limit," and chuckled.

As deficit reduction continues to play a role in fiscal 2012 appropriations the TSP is something of an anomaly. It requested $147 million for fiscal 2012, which it later scaled back to $145--in both cases much greater than the $131 million Congress appropriated for it in the current fiscal year. The fund's budget has increased by approximately $45 million in 5 years, according to Long's testimony.

Long attributed the increase to the recent TSP systems modernization, updates to websites and web services and now, to the expenses associated with implementing the Thrift Savings Plan Enhancement Act of 2009.

The act requires many changes for TSP. Among the most costly are the additions of automatic enrollment and a Roth option for TSP. Adding a Roth TSP option to the plan will require the agency to change 27 of its 28 record keeping and accounting systems. It will also need to provide new guidance documents and training for what will be a more complex decision-making process, said Long.

For more:
- go the hearing page (webcast and prepared testimony)

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