(January 18, 2012)—The United States government has suspended investments into its pension scheme for federal employees over fears the extra contributions would breach the country’s debt ceiling.
Bloomberg BusinessWeek is reporting that Treasury Secretary Timothy Geithner has informed Senate Majority Leader Harry Reid that the so-called G-Fund would be “made whole once the debt limit is increased”.
The scheme liabilities, which covers the retirement and healthcare benefits for all US government employees—including White House staff—topped $1.6 trillion at the end of 2007. However, at that point, there was only $790 billion in assets to cover them, according to documents published by the Office of Personnel Management in Washington and seen by aiCIO.
The shortfall, which stood at $878 billion at the end of 2007, was believed to be the largest in the world and may well have grown as a result of the ensuing turbulence in global markets.
The US Treasury has been injecting supplements to the Federal fund for over 30 years in an attempt to resolve the deficit. Since 1979, the department has supplemented the scheme with an annual payment that reached almost $30 billion in 2006. These taxpayer-funded payments were scheduled to increase until 2080.
The debt ceiling in the US sits at just under $15.2 trillion and was the subject of great political debate last year over whether it could be raised. Politicians decide further moves on the issue this month, which could see the debt ceiling raised again.
<p>To contact the <em>aiCIO</em> editor of this story: Elizabeth Pfeuti at <a href='mailto:epfeuti@assetinternational.com'>epfeuti@assetinternational.com</a></p>