The government could reach its debt limit of $14.3 trillion as soon as next month. If Congress does not raise the debt ceiling, what happens to your Thrift Savings Plan G Fund, which is backed by government debt securities?
During a debt limit suspension period, the Treasury Department cannot issue new G Fund securities. But even in this suspension period, TSP investors don’t have to worry about their G Fund, said Tom Trabucco, director of external affairs for the Federal Retirement Thrift Investment Board, which oversees your TSP, in an interview with the DorobekINSIDER.
Congress passed legislation in 1987 that ensured the government would repay any investments into the G Fund when a debt limit suspension period is over.
In other words, Trabucco said, “After the period is over, the G Fund is made whole.”
The “G” fund matures and is reinvested daily. During a debt-issuance suspension period, rather than reinvesting the full balance of the “G” fund, the Secretary can credit some or all of the balance of the fund to non-interest-bearing accounts in the Treasury. These non-interest-bearing accounts do not count against the public debt limit. The law requires the Secretary to move these funds back into interest-bearing Treasury securities as soon as the securities can be issued without exceeding the public debt limit. The accounts of the “G” fund must also at that time be credited with the interest that would have been credited during the debt-issuance suspension period. Consequently, no one who has invested TSP contributions in the “G” fundcan suffer any reduction in assets or loss of interest income as a result of the actions taken bythe Secretary of the Treasury under the authority of section 8438 of title 5.