The Trump administration’s proposal to require FERS employees to contribute more toward their retirement benefits has a number of moving parts, since the financing of the civil service portion of those benefits already is complex.
The administration is seeking to require an increase in employee contributions until the employee and employer shares are equalized, in increments of 1 percentage point starting with enactment of the budget–formally, the proposal would mean October 1 but federal budgets rarely are finalized that early. Afterward there would be further 1 percentage point increases annually until the two shares match.
However, there are several complications. First is that under FERS, employees pay in differing amounts depending on when they were hired, even though the benefit formula works in the same way regardless. Thus to equalize the employee and employeer shares would require increases of differing sizes.
Those hired before 2013 pay 0.8 percent of salary into the system and their agencies pay 13.7 percent, meaning to make the shares equal the employee contribution would have to increase by 6.45 percentage points to 7.25 percent.
However, due to a law enacted in 2012, those hired in 2013 pay in 3.1 percent of salary. By OPM’s reckoning, to make benefits fully funded for them, the total amount in needs to be slightly higher and thus agencies pay 11.9 percent for them. To make the shares equal the employee contribution would have to increase by 4.4 percentage points.
Yet another law, enacted in 2013, required those hired after that year to pay in 4.4 percent of salary, and for them the total to make benefits fully funded requires an 11.9 percent employer contribution. To make the shares equal the employee contribution would have to increase by 3.15 percentage points.
The budget did not define those specifics, however; that would be left to the process of enacting the needed legislation, if that happens.
Another twist is that law enforcement officers, firefighters and air traffic controllers pay in a half-percentage point more than others hired in the same years because they are under special retirement provisions–and their agencies pay in still more, on the order of 30 percent of salary total. Those employees might be required to increase their contributions equivalent to the increases applying to other employees, rather than have to pay substantially more to equalize the employee and employer shares, but that also would be left to be decided.