Thrift Savings Plan Guidance for Federal Furlough

GubMints is a huge fan of the TSP, so I eagerly downloaded this week’s podcast interview with the TSP Executive Director.  Here are some of the highlights of the discussion.

 Breakdown of the TSP:

  • 4M total participants
  •  1.3M of whom are separated/retired
  •  ~ $330B in assets invested the TSP
  •  Average FERS TSP account value is  $88,000
  • 43% of TSP assets are invested in ‘G’ Fund (1st place by asset size)
  • 23% of TSP assets are invested in ‘C’ Fund (2nd place by asset size)
  • Other fund (S-, F-, I-Fund) allocation percentages are smaller  but were not mentioned.

 Other TSP notes:

Since the October 2012 Roth TSP rollout, there are 73,000 participants so far.  Many of them are active military (Yay!)

Roth TSP has been implemented by all ‘large’ payroll offices, but DFAS has not completed to rollout to National Guard/Reservists.   Rollout to NG/Reserves should take place in 2013.

The TSP Executive Director re-iterated that the Treasury Secretary borrowing from the ‘G’ Fund is legal, has already been done 10 times in the history of the TSP, and that each and every time the TSP ‘G’ Fund has been made whole (as required by law).

 GubMints Analysis of the above TSP figures:

1) The $88K account balance per TSP participant seems low at first glance.  Let’s plug in some numbers. Given:

  • The average FERS employee age is 47.
  •  The “average public sector employee tenure” (per the BLS) is roughly 8 years .
  •  The average FERS salary is 90k, and
  •  Assume all FERS TSP participants save 10%/year of salary (employee defers 5% of salary and takes the maximum TSP ‘matching contribution’ of  5%).
  • Assume an average rate of return of a balanced fund is ~5% per year (we assume that with 43% of TSP assets invested in the ‘G’ Fund, the investment return behaves like a 50% stock/50% bond ‘balanced’ mutual fund).

THEN grab your HP-12C calculator (or use the 12C Calc app on your smartphone):

 90,000 [Enter] .1 X [Enter] [PMT] ;  8 [n];  5 [i];  0[PV];     [FV] = 85,942

 … well, I guess an average $88k balance per FERS employee is not that far off.


2) 43% of assets are in the ‘G’ Fund?  Wow.  Are we Feds that paranoid about the future outlook of the private sector?

Let’s assume the 1.3M ‘separated’ TSP participants are retired, living off income from the ‘L Income’ Fund, which is 74 % ‘G’ Fund:

The allocation of ‘G’ Fund assets attributable to TSP retirees is:

  (1.3M / 4M) X 74% =  .24  in ‘ G’ Fund assets, from separated participants alone

 Let’s assume the remaining 2.7M participants are of ‘average’ public sector employee age  at ~45 yrs old, invested in the Lifecycle fund that matures when they are projected to reach age 65 (~ L 2030), which is composed of 23% ‘G’ Fund.

The allocation of ‘G’ Fund assets attributable to active FERS employees and active military are:

(2.7M / 4M) x 23% = .16  in ‘G’ Fund assets, from wage slaves.

 Adding the G Fund allocation of TSP retirees + working stiffs is

 .24 + .16 = 40%.

Ok, pretty close to the 43% stated ‘G’ Fund allocation, so the math checks once again.  Once you also factor in that a ‘mature’ account is likely to have a higher balance than an ‘average’ working employee still accumulating TSP funds for retirement, this is probably enough to tilt the scales the additional 3% in favor of ‘G’ Fund allocation.


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Ok, you can if you want to, but it will cost you roughly $350 per year versus waiting until 2014 to retire.

Fedweek produced a somewhat tongue-in-cheek article calling the 2010 National Defense Authorization Act the ‘No FERS Employee Retires in 2013 Act’.

For those who recall, the 2010 NDAA restored sick leave parity between the FERS and CSRS systems, phasing in full sick leave credit for FERS participants in 2014.

Would you gut it out an additional year just for a $350 per year annuity check?  I don’t think so, but a FERS employees ‘on the fence’ in December of 2013 might wait until January of 2014 to retire.

We’ll have to wait and see.

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On December 26th, while we were all busy recovering from the Holiday and headed out for year-end clearance sales, the Treasury Secretary dropped a surprise on us.   He announced that the federal government will once again hit its ‘debt ceiling’ on Dec 31st, and that the Treasury will take ‘extraordinary measures’ to stretch out its checkbook.

Interestingly, the most comprehensive breakdown I’ve found of the ‘extraordinary measures‘ is from the UK’s Guardian, not from a US-based news organization.  The four measures, listed in order of magnitude, are:

  1.  Stop investments in to the Civil Service Retirement and Disability Fund (CSRDF)- the CSRS annuity for retired and disabled CSRS participants (note: I am clueless on the CSRS retirement system as I am not a participant.  The link is informative, but an opinion piece).
  2. Suspending investments in to the TSP G Fund.
  3. Halt issuance of State and Local government securities (SLGS)
  4. Cease contributing to the Exchange Stabilization Fund (used to purchase foreign currency).

What #2 means to you and me is that, among other things, the Treasury Department will take out a 401k loan against your TSP balance.  Specifically, the Treasury will borrow from the G Fund and issue IOU’s to pay them back at a later date.

If this all sounds familiar, it is.  This is one of many extraordinary measures the Treasury took last time the nation neared its debt ceiling in May of 2011.  After the debt deal was reached in August of 2011 (which set up Sequestration, aka the ‘fiscal cliff’), the TSP G Fund balances were made whole.

What’s it mean to you and me?  Probably not much, as long as:

  1.  You don’t take personal offense at the Treasury Secretary raiding your individual retirement funds (Your TSP balance).
  2.  All past and present government employees and military participants in the TSP do not all sell-off their G Fund holdings at once.
  3.  Institutional Investors and sovereign nations continue to purchase US Government-issued debt.

The mechanics of how the G Fund is raided are described pretty well in this 2002 GovExec article, when the G Fund was about to be raided in order to avoid a what-seems-paltry-now debt ceiling limit of $6 Trillion.