TSP Executive Director Greg Long said in a recent letter to TSP participants that in the event of hitting the debt ceiling, it is possible that the government will delay issuing new securities for the G fund to avoid increasing the federal debt.
Long reassured participants that they are protected and wouldn’t lose any money as part of the process.
FedSmith.com detailed this practice in a recent article, Using the G Fund to Help Fund Federal Expenses.
The full text of the letter is listed below.
A Message from the TSP’s Executive Director
As we await legislation on raising the Federal debt limit, I would like to address your concerns about the possible suspension of issued securities to the Government Securities Investment (G) Fund. In the event that the U.S. Government reaches the statutory Federal debt limit, the Federal Government may temporarily be unable to issue new securities to the G Fund because to do so would exceed the present debt limit. However, G Fund investors are always fully protected and G Fund earnings are fully guaranteed by the Federal Government due to statutory protections in the Thrift Savings Plan Investment Act of 1987. This protection, known as the “make-whole” provision, will work to ensure that G Fund investors are completely unaffected by the limitation on securities issued by the U.S. Treasury. G Fund account balances will continue to accrue earnings and be updated each business day, and loans and withdrawals will be unaffected.
The Government Accountability Office has published a report which explains the full protection provided to G Fund investors when the U.S. Government reaches the statutory Federal debt limit. The report can be found here: http://www.gao.gov/products/GAO-12-701
If you have any additional questions, please call the toll-free ThriftLine at 1-877-968-3778 and speak to a Participant Service Representative.
Greg T. Long