The White House budget proposal released this week for the fiscal year starting in October contains several familiar proposals to devalue federal retirement benefits, along with a recommendation that no raise be paid next January.
The proposals come as no surprise: the pay freeze plan had been leaked months ago to Senate Democrats, who publicized it, and employee organizations had been warning for just as long that retirement would again be targeted.
On retirement, the White House repeated proposals in its budget plan from last year including raising the required FERS employee contribution toward retirement, and lowering the government contribution, until the two are equal. The result would be 1 percentage point increases over six years for FERS employees hired before 2013. Those hired in that year and after already pay more toward retirement, so their increase would not be as large. As with last year’s proposal, those under CSRS would not be subject to an increase.
However, those under both systems who retire after a date that would have to be specified would have their annuities based on their “high-5” salary average rather than their “high-3.” Further, future FERS retirees would be ineligible for the “special retirement supplement” that replicates a Social Security benefit earned while under FERS and is paid up to age 62 when that benefit begins.
Also repeated were proposals that would affect both current and future retirees, to shave 0.5 percentage points off COLAs for CSRS retirees and to eliminate the COLA on FERS annuities. FERS retirees would remain eligible for COLAs on the Social Security component of their annuities, which would not be changed.
Also, the budget plan adds an idea from past proposals from some House Republicans to decrease the rate of return—and thus the amount the government pays in interest—in the TSP’s G fund, its most popular fund.
The House last fall passed a budget outline that endorsed such changes although it would have left details up to the Oversight committee. However, that advanced no farther after the Senate produced a counterpart containing no such recommendations—a measure that Congress quickly passed because it provided the authority for the Senate to approve changes to tax law with a simple majority vote by Republicans only.
This year less pressure to find savings is expected in light of the recent budget agreement raising prior spending caps. While the House might again pass a budget outline endorsing cuts, there already is an expectation that the Senate will not even write a counterpart but will instead use funding levels in the agreement as the basis for 2019 spending bills.
