Republicans Consider Cutting G Fund Interest Rate to Raise Money

Republicans in the Senate have revived a previously defunct idea that would drastically cut the interest rate that the G Fund pays to TSP investors.

As the government struggles to come up with the funds necessary to cover its rapidly growing debt, politicians are looking for creative ways to come up with more money to spend.

One recent possibility floated by Senate Republicans is revisiting an idea that was mentioned in the 2016 House budget proposal which was to deeply cut the interest rate paid to investors inside of the Thrift Savings Plan’s G Fund.

The short and sweet of this proposal means that the G Fund would begin paying an interest rate comparable to that of a standard money market fund. For details on how exactly this would work, be sure to see Will a New Budget Cut G Fund Interest Rates?.

Despite having been cut from the final budget blueprint, the idea was put on the table again during debate over a long term extension of the Highway Trust Fund.

Federal employee advocacy groups are naturally vehemently opposed to the idea of cutting G Fund interest rates.

NTEU National President Colleen M. Kelley sent a letter to Senators today arguing against the proposal, saying that “any change to the G Fund would send a signal to the federal employees, retirees, and military personnel that the Thrift Savings Plan is no longer free from manipulation.” Kelley added, “A federal employee needs the TSP to achieve a retirement income that is enough to live on. How can Congress change the rules that employees and retirees have relied on for decades in responsibly planning for their retirement in order to fund a highway bill?”

The National Active and Retired Federal Employees Association also sent a letter to Senators in which its president, Richard Thissen said, “At a time when federal employees, retirees, job seekers, and their families are reeling from news that their most personal information and financial data has been compromised, it is unconscionable that this very constituency would be targeted for cuts to pay for completely unrelated legislation.”

The House passed a short term extension of the Highway Trust Fund late Wednesday afternoon which leaves the G Fund untouched, but it will largely depend on what action the Senate takes on a long term funding measure as to whether federal employees will ultimately have to worry about the proposal. If the short term funding measure from the House ultimately moves forward as is, no changes would be made on the G Fund.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.