Overall government workers have a good deal, in fact, a deal far better than the average American and the struggling middle-class the political left idolizes. And remember, it’s the middle-class paying for that good deal including generous pensions, health benefits, savings plans and retiree benefits. Don’t get me wrong, government workers deserve a fair total compensation package, but there are things that work their way into packages that are unfair to taxpayers.
For example, in New Jersey employees can borrow from the pension trusts ( greatly underfunded by the way). The current interest rate charged on a loan is 5.25% plus a modest processing fee of $8.00. At the same time the assumed investment return for the trusts is 7.9%. This means that for these trusts that are struggling to meet obligations the fund is losing at least 2.65% on every dollar it lends and substantially more if fund earnings exceed the basic assumptions. There is no reason for this process, no reason for participant loans from a defined benefit pension plan. Why should taxpayers subsidize these loans, if loans are necessary, why not an interest rate equal to the assumed return on the funds?
Then we have this on the federal level. Taxpayer funded higher than normal return on a guaranteed fixed income investment; something not available to private sector workers. Why should this continue, why should they be treated better than the rest of Americans?
Note that 43% of these investors are 100% invested in this fixed income fund; not very smart for the long-term accumulation of pension assets, but then again if you also have a good pension, your savings plan is not all that important. 😏
The most popular fund in the Thrift Savings Plan would become “virtually worthless” as an investment option under a proposal in the House budget, a TSP spokeswoman said.
The budget plan, up for floor voting this week, assumes a change in the way money in the government securities fund, or G Fund, is invested that would sharply drop its rate of return.
The fund is a special offering in the TSP, the 401(k)-style retirement savings plan for federal employees and military personnel. The money is invested in a mix of Treasury securities that yields returns higher than that of short-term bonds, but with none of the risk of investing in longer-term bonds from losing principal if interest rates go up.
A report from the House Budget Committee says: “Securities within the G Fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. Government. Yet the interest rate paid is equivalent to a long-term bond. As a result, those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security.”
It projects that dropping the interest rate the G Fund pays to match short-term rates could save up to $32 billion over 10 years.
The fund paid 0.18 percent in February, with a return over the last 12 months of 2.22 percent—well above returns for other short-term forms of investment whose returns are guaranteed.
The fund is the program’s largest, holding about $194 billion of the $452 billion on investment as of February. Of the roughly 4.7 million TSP participants, more than 4.3 million invest in the fund; 43 percent of investors have their entire account in it.
via G Fund’s return would drop to nearly zero under House plan – The Washington Post.
QUINNSCOMMENTARY 