Greg Long, the executive director of Thrift Savings Plan, recently assured investors that they would be fully protected by federal guarantees if the government cannot issue new securities in the event it reaches the statutory debt limit.
The Thrift Savings Plan Investment Act of 1987, known as the “make-whole” provision, protects investors in the Government Securities Investment Fund—or G Fund.
“This protection…will work to ensure that G Fund investors are completely unaffected by the limitation on securities issued by the U.S. Treasury,” Long said. “G Fund account balances will continue to accrue earnings and be updated each business day, and loans and withdrawals will be unaffected.”
In 2011, the government enacted the Budget Control Act of 2011, which helped to raise the debt limit to the current level of $16.4 trillion using incremental increases that began in August 2011. The U.S. Treasury took “extraordinary” action, including suspending the Postal Benefits Fund, and investments of the Civil Service Retirement and Disability Fund, Exchange Stabilization Fund and G Fund.
The Treasury then restored uninvested principal and interest losses to the Postal Benefits Fund, CSRDF and G Fund but did not restore interest losses to the ESF due to the lack of authority to do so.