US - Treasury secretary Timothy Geithner said yesterday he suspended investments into two federal pension funds and plans to redeem billions in assets since the US has bumped up against its $14trn debt ceiling.
In a letter to congress, he said the moves will provide about $215bn in headroom under the debt limit.
Geithner said debt issuances for the Civil Service Retirement and Disability Fund, which covers retired and disable federal employees, have been suspended between 16 May and 2 August. He said the "Treasury Department will suspend additional investments of amounts credited to, and redeem a portion of the investments held by, the CSRDF, as authorized by law".
The government is able to redeem any Treasury securities held by the CSRDF equal to the benefit payments due to be paid out during the suspension period. CSRDF currently pays $6bn per month in benefits, which the Treasury estimates will provide about $17bn in wiggle-room under the debt ceiling.
The Treasury can also divert assets coming into the fund during the debt suspension period, including employer contributions and interest payments on securities. Treasury can also keep the proceeds of some $67bn in assets that mature on June 30 that would normally be reinvested.
Meanwhile, investments in the Government Securities Investment Fund of the Federal Employees' Retirement System - a money-market, defined contribution retirement fund - were also suspended on 16 May. The so-called G-fund is invested in special-issue Treasury securities which go against the debt ceiling.
By suspending these investments, the Treasury will gain leeway of $130bn beneath the debt limit.
Both funds will be made whole once the debt limit is increased.
Geithner wrote: "Each of these actions has been taken in the past by my predecessors during previous debt limit impasses. By law, the CSRDF and G Funds will be made whole once the debt limit is increased. Federal retirees and employees will be unaffected by these actions."
The Treasury took similar measures in 1996, 2002, 2003, 2004 and 2006.
He added: "I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens. I again urge Congress to act to increase the statutory debt limit as soon as possible."
A buyout tool which provides schemes with up-to-date pricing and comparisons between insurers has been launched by JLT Employee Benefits.
The DB white paper sets out plans to review the funding regime, with 'prudent' and 'appropriate' possibly redefined. But James Phillips asks if this could this signal a return to an MFR-like approach?
The trustees of GKN's pension schemes have agreed a package of mitigation measures that would improve funding to a "more prudent level" if Melrose's offer is accepted by shareholders next week.
While the new powers are welcome, most respondents doubt it will make a difference to the outcomes for members, Pensions Buzz respondents say.