(c) 1999 20th Century Fox

Post Update 2/26/2013: TSP Funds made Whole by the Treasury Dept-  ‘G’ Fund ‘raid’ is over (for now).

(c) 1999 20th Century Fox
‘Whassup, G?’

Recently the TSP Director issued a statement reassuring TSP members that their investments in the G Fund are safe, and that any short term borrowing performed by the Treasury as a part of its ‘extraordinary measures‘ in dealing with the debt ceiling will not affect TSP participants.

He referenced the recent GAO report reviewing the recent raid on the G Fund.

For those who do not wish to read all 39 pages of the GAO report, the key findings are:

  • G Fund investors during the previous ‘raid’ were made whole, and that the Treasury Department borrowing against the G Fund is legal as “required by subsection 8438(g) of title 5, United States Code” (page 19).
  • Treasury Yield spreads drop during the ‘raid’ periods (page 22).

When yield spreads drop, it gets more expensive for the Treasury to borrow.   So while the effect on the TSP G Fund investor is negligible, the overall effect on the U.S. Taxpayer is increased cost.

 

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As mentioned here, the next food fight in DC will be regarding the Debt Ceiling.  The Treasury Secretary is already taking extraordinary measures to continue to operate the US Government as we bump up against the current debt limit.

Many of you have heard the post-fiscal-cliff-deal-did-nothing-about-sequestration saber rattling of the impending Government Shutdown.  If you don’t already know, the first rule about Government Shutdown is- There is no Government Shutdown.

For those not fluent in OPM-ese, there are two types of furlough– The ‘Administrative Furlough‘ and the ‘Shutdown (aka Emergency) Furlough‘.

This discussion refers to the ‘Shutdown (Emergency) Furlough‘.

 As fallout from the two Clinton-Gingrich Government Shutdowns  of 1995-1996, most government agency heads got wise and put together boilerplate policies to enable their agencies to continue performing their core functions during the next inevitable government shutdown.  For example, during the 2011 threatened shutdown, the DoD issued this policy, which clearly states:

Operations and activities that are essential to safety, protection of human life, and protection of our national security, are ‘excepted’ from shutting down….Other excepted activities will include inpatient and essential outpatient care in DoD medical treatment facilities; emergency dental care; non-appropriated funds activities such as mess halls and child care activities; certain legal activities to support ongoing litigation and legal assistance for deployed DoD personnel; contracting and logistics operations that are in support of excepted activities; certain education and training activities to include the DoD education activity schools; and financial management activities necessary to ensure the control and accountability of funds. 

Furthermore:

…Military personnel are not subject to furlough and will report for duty as normal during the shutdown. Reserve component personnel should refer to the DoD Contingency Guidance document and to their chain of command for more specific information.

…Civilian personnel deemed to be performing excepted activities will continue to work during the period of a shutdown. 

Can you think of any DoD function left out here?  I can’t think of too many off-hand.  I’m singling-out DoD here because I’m an employee and pay the most attention to its Secretary’s instructions, but there are similar policies in place for State, Treasury, Justice, etc departments.

So for all the squawking and hype, my best read is that lawmakers have become wise that a  government ‘shutdown’ is a misnomer- It doesn’t really shut anything down and does not save the government a significant amount of $$.  Therefore, I believe an ‘Administrative Furlough’ is the more likely scenario in the upcoming Feb-Mar 2013 debt ceiling/sequestration showdown.

For further reading on a possible ‘Shutdown Furlough’, here’s a recent Washington Post primer on the guidance for the last proposed government shutdown.

The Next GubMints post will deal with the issue of the ‘Administrative Furlough’… standby!

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Two riders in The American Taxpayer Relief Act of 2012 (the Fiscal Cliff Deal) apply directly to Federal Employee Benefits.  They are:

1) Increasing the Transportation Incentive Program (TIP), a program to incentivize federal employees to use mass transport or vanpools, to a monthly stipend of $240.  The language in the bill restores parity between commuter expenses for parking (currently $240/month) vs. mass transport (was $125).  They are now both set at $240, retroactive to 01 January 2013.

2) Ability to convert money in your employer-sponsored 401k account to the employer-sponsored Roth 401k account (if offered by the employer).

Just like the creation of the Roth TSP, It will probably take the TSP 12-18 months to catch up with this provision, but my prediction is that it will happen.  This provision in the Fiscal Cliff Deal was put there as revenue grab to get income taxes now (immediately upon 401k conversion to Roth 401k)  vs in the future (eventual withdrawals from 401k).  My take on the conversion is that it is probably a bad idea to convert a Traditional IRA/401k to a Roth IRA/401k right now unless you are absolutely certain you will be in a higher marginal bracket when you retire.

As an aside, “The American Taxpayer Relief Act of 2012”?  If my recollection is correct, this was created and passed by both houses of congress on January 02, 2013…


I’ve updated the recent analysis about Fiscal Cliff (aka Sequestration) impact on your wallet, now that we have a ‘Fiscal Cliff Deal’ struck on 02 January 2013.

There’s also a good synopsis of the ‘Deal’ done by Fidelity Investments.

Graphic click will take you to the updated GubMints ‘Fiscal Deal’ analysis post:

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