FEDweek

White House to Seek Cuts in Retirement Benefits

Update: See: Trump Budget Proposal Would Cost Federal Employees, Retirees Big Bucks

Changes in federal retirement policies included in President Trump’s budget proposal would impose substantial new costs to active employees to fund their future benefits while reducing the value of benefits for both current and future retirees.

The Trump administration budget proposal to be released Tuesday will include several proposals to cut federal retirement benefits, according to a published report and a union official.

The Washington Post reported Friday that the budget will propose an increase in required contributions toward retirement by employees under FERS, starting with a 1 percent of salary increase and with an additional 1 percentage point added each of the following years until the employer and employee shares are equal. That would mean an eventual increase of about five or six percent of salary for most FERS employees, although those hired 2013 and afterward already pay in more than those hired before.

The newspaper reported that administration officials said the increase would only apply under FERS because they consider contributions by CSRS employees already equal to government contributions–a change in direction from prior Republican proposals, which would have required an increase by both groups.

In what would be another difference by retirement system and another change from past proposals, the newspaper said the budget will seek to deny COLAs for FERS retirees, both current and future, while shaving 0.5 percentage points off the indicated COLA for CSRS retirees. It said that those officials said the fully indexed Social Security benefits for FERS employees would balance out the two.

Other provisions would repeat several ideas that have been raised numerous times: changing benefit calculations of future retirees to base them on the highest five consecutive salary years rather than the current “high-3”; and eliminating for future retirees the “special retirement supplement” paid to those under FERS who retire before age 62 until they reach that age and Social Security begins.

The newspaper said the White House will propose that the changes be effective as of fiscal year 2018, which begins October 1, but that there would be flexibility since the federal budget for the new fiscal year often is not finished on time.

An AFGE witness had said at a House hearing Thursday that the budget would include such provisions, although she did not go into detail.

OMB earlier said that the budget will propose a 1.9 percent general federal employee raise for January 2018.