The shutdown that occurred in 2018-2019 delayed TSP contributions, and therefore weren’t invested, but the court decides federal employees can’t sue over potential investment gains.
The 35-day government shutdown that ran from the end of 2018 and bled into 2019 left federal employees without pay until Congress and the White House agreed to re-open government operations in February of that year. This also meant that TSP contributions that came from backpay didn’t get invested until after the shutdown, meaning feds lost any potential gains they could’ve received had the contributions been in the markets at that time.
Frustratingly, the core TSP funds that track stock indices – the C, S, and I funds – experienced returns around 10% in that timeframe. As a result, a group of four anonymous FBI employees filed a lawsuit against the federal government to try and recoup some of the investment gains that they missed out on due to the delayed receipt of contributions.
The Court’s Decision
The US Court of Appeals for the 3rd Circuit decided against the federal employees earlier this month. Although the 1986 law that regulates FERS states that feds can sue over TSP contributions delayed by twelve days or more, the panel of judges interpreted the rule so that it does extend to “damages” – such as potential movements in the TSP investments occurring during the delay. If such damages are the result of an agency error, then federal employees are allowed to bring a case to court to recoup their losses. The court ultimately decided that a government shutdown, initiated by an impasse between legislative and executive branches, does not constitute an agency error.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.