Among the options that would affect both employees and retirees would be changing the premium sharing arrangement in health insurance programs—traditionally only affecting the FEHB but now affecting the new PSHB program. Image: Doubletree Studio/Shutterstock.com
By: FEDweek StaffThe Congressional Budget Office has again raised a series of options for reducing the deficit including several that would directly impact federal employees and retirees and others that would affect them along with the population in general.
While the report—a version of which is issued every several years—does not formally recommend the changes it raises as options, its contents carry weight on Capitol Hill because they “score” as real savings for budgetary purposes.
Many of the same options, although at times in different forms, were included in budget proposals during the first Trump administration and congressional Republicans have pushed them at the time and since, only to be thwarted by Democrats.
Among the options that would affect both employees and retirees would be changing the premium sharing arrangement in health insurance programs—traditionally only affecting the FEHB but now affecting the new PSHB program. Under that option, rather than the employer share increasing with the actual growth in premiums, that share would be set at a flat amount, used as a “voucher” for enrollees to purchase coverage, paying the difference out of pocket.
While under that option the value of the voucher would increase with general inflation, that generally is below the rate of inflation in the health care sector. That would shift costs over time from agencies onto enrollees over 10 years of either $14 billion or $20 billion, depending on the inflation index used, it says.
An option affecting only active employees would set the required contribution toward the FERS civil service annuity at 4.4 percent of salary for everyone under FERS. That rate now applies to more than half of FERS employees, but those hired before 2013 pay only 0.8 percent while those hired during 2013 pay 3.1 percent (with no difference in the benefit formula). That would increase income to the federal retirement fund by $40 billion over 10 years, it says.
Also for employees only, the report also again raises the option of a change to the formula for setting annual federal employee raises, under which a half-percentage point is shaved off a Labor Department index of private sector wage growth and is to be used as the across-the-board component for the raise. The report says that reducing the figure by 1 percentage point instead would produce savings of $77 billion over 10 years but notes that in practice the law’s formula commonly is not followed in any case, saying that “policymakers have often lowered the adjustment” indicated.
Other, broader options, that would affect federal employees and retirees would include increasing premiums for Medicare Part B; reducing Social Security benefits for high earners; raising the age at which full Social Security benefits begin; linking Social Security to an inflation index that would pay smaller annual COLAs; and more.
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