Potential TSP Gains Lost During Shutdowns?

Missing out on possible gains from the stock market due to no fault of your own is frustrating. A group of FBI employees determined that the potential profits they could have made if TSP contributions hadn’t been delayed were enough to make them entitled to damaged.

The group of anonymous federal employees sued the state for the loss of potential market gain they could have made. A 35-day-long government shutdown in 2018 and early 2019 left these employees with no pay and delayed contributions to their Thrift Savings Plan. Meanwhile, other popular TSP funds increased their value by 10%.

The state, however, argued for sovereign immunity. Despite this, the case proceeded. U.S Court of Appeals determined that losing out on any potential market gains because of delayed contributions to TSP was not a liable reason to demand damages. Former President Trump appointed the three judges.

U.S. Circuit Judge Stephanos Bibas states that the 1986 Federal Employees’ Retirement System Act includes the provision allowing fed employees to sue. This provision is valid in case agencies fail to make the TSP contributions for more than 12 days. However, the provision doesn’t include potential benefits and gains that could have been produced but were missed due to the delay.

The court said the following in a statement “In employment, [a benefit] typically includes perks like life and health insurance…. agency’s Thrift contribution, [but], not damages flowing from a late contribution.” The court believes that the employees asked them to consider the time value of the contribution that doesn’t fall under the term ‘benefits’ as described by the law. “The concrete benefit due is a percentage of salaries, not the returns on that money,” the court wrote.

Bibas spoke about how the ability to sue over potential benefits is nothing short of a double edge sword. For him, the benefit always needs to be something the suit can recover. If the market growth on TSP funds is to be considered a benefit, then it falls within reason to say that any market loss would also need to be considered. “If the market falls, the employee would be entitled to a smaller late payment than if it had been paid on time,” Stephanos Bibas wrote.

Moreover, whether agencies are liable for delays in TSP contributions also depends on how much control they had over the circumstances causing the delay. The specific delay referred to by the federal employees was caused by congressional and political inaction. It wasn’t an event that was under an agency’s control. The regulations detailing employees’ right to recover some lost earnings exclude ‘an act or omission caused by events beyond the control of the [Thrift Investment] Board, the [Thrift] Record Keeper, or the participant’s employing agency.’ Hence, congress had the right to chose not to authorize remedies for TSP earnings lost.