The debt limit has not been raised by Congress so the debt ceiling for the federal government was reached in March 2017. During this time, the Department of Treasury has been using “extraordinary measures” so the federal government can pay its’ bills. However, they are expected to run out extraordinary measures by early September 2017. At that time, the government will be relying entirely on tax receipts for new funds.
Even if those tax receipts remain “healthy”, the federal government estimated it’ll be out of money by early October. Although, this estimate has changed.
Treasury Secretary Steven Mnuchin says Congress should vote on raising the debt limit before going on their August recess. The debt limit is the total amount the government is authorized to borrow to meet its legal obligations like Social Security and Medicare benefits, military salaries, interest on national debt, and tax refunds.
The debt limit does not authorize new spending commitments. It only allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
The national debt is now almost at $20 trillion and the debt limit is $19.808 trillion.
The extraordinary measures available to the Treasury that may be of interest to federal employees and retirees are:
- Determining that a “debt issuance suspension period” exists, which permits the redemption of existing, and the suspension of new investments of the Civil Service Retirement and Disability Fund and Postal Service Retirees Health Benefit Fund.
- Suspending reinvestment of Government Securities Investment Fund (G-Fund in TSP).
These measures are limited and only postpone the need for an increase in the debt limit. On average, the public debt of the U.S. is increasing by $100 billion per month.
Once the debt limit has been reached, the Treasury may also suspend the daily investment of Treasury securities held by the G Fund of the TSP. The G Fund is a money market defined-contribution retirement fund for federal employees. The Fund invests in special-issue Treasury securities and those securities count against the debt limit. The balance matures daily and the government normally re-invests the money. Congress has granted the Treasury Department authority to suspend the reinvestment of all or part of the balance of the G Fund when the Secretary determines the fund can’t be fully invested without exceeding the debt limit.
By law, the G Fund will be made whole once the debt limit is increased. The Treasury assures federal employees and retirees that they will not be affected by these events. Overall investors in the TSP who invest in the G Fun don’t lose money.
Below is a statement TSP has issued in the past regarding the G Fund and debt suspension period.
“The make-whole provision means that TSP participants who have invested in the G Fund will not lose anything. G Fund account balances would be the same from day to day as if they were invested in Treasury securities. Furthermore, disbursement of TSP loans and withdrawals would not be delayed nor would the amounts of those payments be reduced.”
The CSRDF provides defined benefits to retired and disabled federal employees covered by CSRS. The Treasury Department is authorized to suspend investing money received by CSRDF. This authority can be used when the Secretary of the Treasury determines additional investments can’t be made without exceeding the debt limit. Also, the Treasury can redeem existing investments held by CSRDF when the Treasury Secretary declares a “debt issuance suspension period”. Currently, the Secretary of the Treasury has issued one of these which started March 16, 2017, and ends July 28, 2017.
The Postal Accountability and Enhancement Act of 2006 requires investment in PSRHBF be made in the same manner as CSRDF.
According to the Treasury Department, benefits for retired and disabled federal employees will continue getting paid even if the debt limit is increased.