Retirement Funds Tapped to Get Around Debt Limit

So we've hit the debt ceiling. That means it's time for the acounting tricks to begin to keep the government afloat until members of Congress can agree on a deal to lift the debt limit and allow more government borrowing.

First up? As usual, tapping the funds in federal retirement programs. The Treasury Department announced Monday that Secretary Timothy Geithner had declared a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund. That allows the department to redeem a portion of existing Treasury securities held by the fund as investments and suspend new investments. Geithner also suspended the daily reinvestment of Treasury securities held as investments by the government securities ("G") fund of the Thrift Savings Plan.

The department posted a sheet answering frequently asked questions about the move.

It's hardly the first time this has happened. Luckily, federal law requires that any funds witheld from the retirement accounts be put back in once a debt ceiling agreement has been reached.

"By law, the CSRDF will be made whole once the debt limit is increased," Treasury said. "Benefits for retired and disabled federal employees will not be affected by this action and will continue to be paid. Once the United States has exhausted the extraordinary measures it has available to preserve lawful borrowing authority without exceeding the debt limit, however, the U.S. government will be limited in its ability to make payments across the government."

In a letter to members of Congress explaining the action, Geithner noted that "each of these actions has been taken in the past by my predecessors during previous debt limit impasses."

It's nice the way this news breaks the day after a report that employees are likely to have to begin depositing more of their salaries into their retirement accounts.