The administration’s fiscal 2021 budget proposal includes a set of oft-repeated proposals regarding employee contributions toward retirement, retirement benefits, premium sharing in the FEHB and the TSP’s government securities G fund.
In terms of dollar impact, the most significant would be to require employees under FERS, although not under CSRS, to pay more toward retirement while the government share reduced, until the two equalized. The shift would be made in 1 percent of salary increments per year until that point is reached, resulting in about a 6 percent of salary additional contribution toward retirement required for most of those under FERS (lesser in the case of those hired in 2013 and after who already pay more than those hired previously).
That would shift $23.6 billion over five years and $87.4 billion over 10 years from the government onto employees.
The next largest dollar impact, $12.6 billion over five years and $53.6 billion over 10, would come from shaving a half-percentage point off COLAs for CSRS retirees while eliminating the COLA on the civil service portion of FERS annuities (COLAs on their Social Security benefits would not be affected).
Eliminating the FERS “special retirement supplement” paid up to age 62 when Social Security can begin for those retiring before that age would amount to a $5.7 billion loss over five years and $19.9 billion over 10. The budget does not specify it, but presumably that would apply only to new retirees and would have exceptions for those under mandatory retirement systems requiring them to retire earlier, since the budgetary projections are comparable to past proposals specifying those provisions.
Changing from a high-3 salary base for new annuities would reduce those annuities by $3 billion over five years and by $8.1 billion over 10, while reducing the G fund interest rate would lower its payout to TSP investors by an estimated $5.7 billion over five years and $10.5 billion over 10.
Also proposed once again is setting the government contribution for FEHB premiums at a “base rate” while paying more toward premiums of plans with high quality ratings and less toward those with lower ratings—presumably, as in the past, the top third and the bottom third. That would reduce the government’s cost of premiums by $1 billion over five years and $3.2 billion over 10 by incentivizing plans to hold down costs and incentivizing enrollees to join such plans, the budget says.
More about the FERS Social Security Special Retirement Supplement at ask.FEDweek.com