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Treasury halts pension investment

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The U.S. Treasury officially suspended some investments of federal employee pension funds as part of the “extraordinary measures” the government will need to take to keep the country funded while Congress reconsiders the statutory debt limit.

In a letter to House Speaker John Boehner, R-Ohio, sent Friday, Treasury Secretary Jack Lew “respectfully” urged Congress to raise the debt limit as soon as possible.

Lew issued a “debt issuance suspension period,” affecting the Civil Service Retirement and Disability Fund and the investment of Treasury securities held in Federal Employees’ Retirement System Thrift Savings Plan.

In February, Congress approved a temporary extension of the debt limit, which expires this week.

The Congressional Budget Office has said that if Congress doesn’t vote to raise the debt ceiling, Treasury will run out of cash by October or November.

The political game of chicken over raising the country’s spending limits is becoming common practice in Congress. The debt ceiling has been raised five times in President Obama’s time in the White House alone.

Nor is this the first time government workers have seen their pensions held hostage over funding battles.

“We tell all of our participants that their retirement money is protected by law,” said Kim Weaver, Director of External Affairs for the Federal Retirement Thrift Investment Board, which administers the Thrift Savings Plan.

“No one is at risk of losing their retirement,” she added.

The TSP covers $4.6 million current and former government employees, many of them in the military. The plan holds more than $390 billion in assets, making it the largest defined contribution plan in the world.

News of the “extraordinary measures” does not mean federal employers are not matching employees’ contributions, explained Weaver.

What it does mean is that the G-Fund, one of several investment options offered to TSP participants and which holds about $191 billion of assets in specially issued government treasuries that specifically fund the retirement plan, won’t be fully invested.

When the debt ceiling issue is resolved, those assets will again be fully reinvested, and any lost interest on the money not invested during the suspension will be paid back.

“Ultimately the participants are made whole,” said Weaver. “This situation is not optimal, but the protection is there in law, and it is something we’ve unfortunately had a little more experience with than we would like lately.”