CBO Outlines Possible Benefits Changes

The CBO has issued one of its regular reports on how to reduce the federal deficit, once again including numerous options that would impact federal employment and retirement benefits. The options include: basing retirement benefits on the highest five consecutive salary years rather than the highest three, for those who retire in 2016 and after; making federal pay raises smaller than they would be under the formula in pay law (a law that typically is not followed as it is); cutting employment by 10 percent by attrition over 10 years by filling only one of every three vacancies, with exceptions; and using the “chained” consumer price index as the COLA indicator for federal retirement and Social Security benefits, resulting future increases 0.25 percentage points a year below those projected under current policy. Also mentioned are numerous other changes in Social Security including: reducing the initial benefit calculation; raising the age to collect full benefits to 67 more quickly than currently scheduled and then raising it further to 70; and increasing the amount of salary from which Social Security taxes must be paid—as well as increasing the Medicare tax by 1 percent on all salary. The document did not include an option to switch the premium sharing formula in FEHB to a voucher system that over time would shift more costs onto enrollees but it did cite that idea in a listing of options raised in the past. While the CBO does not formally recommend changes in programs, its reports are important because it considers the options as producing real savings for federal budget purposes and they commonly appear in debt-cutting plans offered by members of Congress and others.