Administration may still use retirement funds to avoid debt ceiling

Treasury Secretary Paul O'Neill said Monday he still expects to take administrative action to keep the government from breaching the debt ceiling in the coming days--possibly by tapping federal employee retirement funds.

"I think we're still in the same position--it doesn't look like the Congress is going to come back to deal with this as a special event," O'Neill told reporters following an appearance before a meeting of the Council of Institutional Investors.

O'Neill has indicated previously that he might have to move as early as this week. But he said Monday it is uncertain whether he will take action this week, adding he was not sure whether the debt limit would be reached before Congress returns the week of April 8.

O'Neill declined to say how he would keep the government solvent. "We're looking at different ways to deal with this issue," he said. But he did not preclude the possibility that the government would temporarily tap federal employee retirement accounts to meet current needs.

The move to tap retirement funds would not affect individual employees' accounts, because the Treasury is required by law to replace whatever money it takes out of the funds. (For a more complete explanation of how the process works, see the March 14 Pay and Benefits Watch column.)

Earlier, during his appearance before the group, O'Neill counseled a limited legislative response to fix problems that caused the Enron fiasco.

"I frankly don't see a need for a lot of new laws," O'Neill said. "The SEC has most of the authority that's required to implement new ideas." O'Neill said the government's first priority should be "doing no harm."

He expressed discomfort with proposals to impose controls on retirement funds. "I just can't understand how we could go down the track that would proscribe how individuals can invest their own resources," O'Neill said, calling such a path "really dangerous."

Senate Democrats are seeking to limit options for companies that want workers to hold company stock as part of their retirement portfolios.