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zephyr51  
#1 Posted : Monday, April 11, 2011 9:38:31 PM(UTC)
zephyr51

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Angry
of course this is when things get really bad, but I read this in Federal Times this morning:

Treasury may borrow federal retirement funds in debt emergency
The government could temporarily tap tens of billions of dollars from two federal employee retirement programs if Congress fails to raise the federal debt ceiling next month, Treasury Secretary Timothy Geithner told lawmakers. The government expects to hit a $14.3 trillion debt ceiling on May 16 or before, Geithner said in a Monday letter. Geither implored Congress to extend the debt ceiling by that deadline and said that if Congress does not, Treasury will be forced to borrow money from the Civil Service Retirement and Disability Fund and the Thrift Savings Plan’s Government Securities Investment Fund, or G Fund, both of which are invested in U.S. Treasury securities. Those two moves could free up $142 billion through early July.

The government has taken similar steps before with no effect upon federal retirees. If the debt ceiling is extended by Congress within a couple months of the May 16 deadline, retirees and TSP participants should have nothing to worry about, several experts said. By law, both funds have to be repaid with interest, said Susan Irving, director for federal budget analysis at the Government Accountability Office. “I would anticipate no impact,” echoed Dan Adcock, legislative director for the National Active and Retired Federal Employees Association. Geithner said borrowing money from the federal retirement programs and other “extraordinary measures” available to the government would stave off the need to raise the debt ceiling until around July 8. Once those measures are exhausted, the government “will be limited in its ability to make payments across the government,” Geithner said. In that case, retirees’ pensions could be affected. Adcock said that, if that were to happen, any impact on retirement payouts would be “the least of their problems because we’ll face a worldwide economic collapse.

“I think people would understand what’s at stake and cooler heads would prevail,” Adcock added.

... I don't think anyone would understand this happening.  So, is it best to remove TS funds when retiring and place in an IRA or annuity? Will they be safe?  Maybe a mattress? This is all going way too far.

zephyr51  
#2 Posted : Monday, April 11, 2011 10:16:18 PM(UTC)
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zephyr51  
#3 Posted : Monday, April 11, 2011 11:09:26 PM(UTC)
zephyr51

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Actually just called TSP and was referred to a bulletin page on their home page(to the right) which has to do with shutdowns and borrowing money fmor tsp. This is from the bottom of that page link:

Can the Government take money from the

TSP to resolve the financial situation?

No, the money in the TSP is held in trust for its participants.

Neither Congress nor the Administration can

take money from your TSP account.

So, perhaps we are safe.
retiredin09  
#4 Posted : Monday, April 11, 2011 11:20:40 PM(UTC)
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What may actually happen is they just defer paying interest on the G-Fund?
zephyr51  
#5 Posted : Monday, April 11, 2011 11:22:37 PM(UTC)
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I guess that can be interpreted that way. So the already low interest on G fund goes to "0"?  Interesting tho!
mtg2005  
#6 Posted : Tuesday, April 12, 2011 1:44:32 AM(UTC)
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This has been done in the past. They don't want to buy the G-fund bonds which puts them closer to the debt ceiling. So what they do is first raise the ceiling, then buy the bonds. In the past when they have delayed the purchase (accounting) the purchase has been back-dated as of the date they would have bought the bonds if the debt ceiling wasn't undergoing a change. TSP investors have never taken a loss. (The same is true when deposits in the retirement accounts are delayed [accounting]).
Tryno  
#7 Posted : Tuesday, April 12, 2011 10:43:15 AM(UTC)
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By law, both funds have to be repaid with interest,   So does the interest earned increase the individual TSP G fund accounts? 
bangorme  
#8 Posted : Tuesday, April 12, 2011 12:54:15 PM(UTC)
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I guess the only thought is that once the Feds "borrow" your tsp funds, the repayment becomes part of the deficit.  But I guess it's already borrowed anyway since the funds you put into the G fund now only exist as government paper (debt).  My big fear is, under all these scenarios, that the paper you bought in the G fund is paid back in inflated dollars (like Carter did) so you lose the VALUE of the money, but not the money itself.
Taking money out of any other fund is just theft.bangorme2011-04-12 21:00:46
mtg2005  
#9 Posted : Thursday, April 14, 2011 6:21:52 AM(UTC)
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Well, borrowing? I guess it's a matter of words and whether you think it is borrowing. All they are doing is more like neglecting putting it on the books until they decide to make the bond purchase. It's more like a shell game where the pea gets lost until it appears once again, including interest, found on the books pointing to the proper dates of purchase. Since it is debt purchases, it is always revenue for spending. Actually, I don't know, but I imagine that they can't consider it revenue until the purchase is made. If so it is hard to ascribe either borrowing or spending to it in my understanding of the two words.
 
This is about the debt ceiling, not about their immediate need for the funds. For example, the extreme case would be that they are $1 from the debt ceiling and $1M is deducted from paychecks for the G-fund. There is no way they could add debt of more than $1 so, just to make the G-fund bond purchase, the debt ceiling would need to be raised (or an amount equivalent to the $1M of debt retired.)
donethat  
#10 Posted : Monday, April 18, 2011 3:17:08 AM(UTC)
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Social Security was also a "Trust Fund".  Look what happened to that.  I would not put anything past the members of Congress.
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