Treasury Department Taps into Federal Employee Pension Plan to Avoid Default 

With the current national debt exceeding $8 trillion, U.S. treasury officials informed Congress in February 2006 that they have been forced to suspend investments to the government’s retirement savings plan and instead draw down from the employee pension funds to avoid reaching the United States government’s national debt ceiling. 

U.S. Treasury Secretary John Snow informed Congress that the country’s growing debt level necessitated a series of steps to avoid a first-ever default on its debt obligations. 

The Treasury Department tapped into the Civil Service Retirement and Disability Fund, which Snow stated would provide a “few billion” dollars in extra borrowing ability, $15 billion from a currency exchange fund and investments were taken out of a $65.3 billion government pension fund, formally known as the “G fund”. 

The G fund or the Government Securities Investment Fund is part of a Thrift Savings plan, which is made available to all eligible federal employees and is the government’s version of private-sector 401k plans. 

Secretary Snow described the recent actions as “all the prudent and legal actions [available] to avoid reaching the statutory debt limit.” The Treasury Department further urged legislators to pass a new debt ceiling. 

Treasury officials said that once the debt limit is raised by Congress, the investment dollars taken out of the retirement and pension funds would be replaced and any lost interest payments would be made up by the government. 

In mid-March, the U.S. Senate voted to increase the country’s debt ceiling to $9 trillion and reportedly, the bill is awaiting the signature of the President.