The report repeats previously raised options such as increased retirement contributions, limiting federal pay raises and various changes to Social Security. Image: Rei Imagine/Shutterstock.com
By: FEDweek StaffA recently issued report for Congress could serve as a roadmap for looking to federal health insurance and retirement benefits as targets in a deficit reduction effort by the new House Republican majority.
A “budget options” report includes potentially increasing the contributions that FERS employees make toward their retirement benefits while having all employees and retirees pay more–and the government less–toward FEHB premiums.
In raising those options, as it has numerous times in the past, the Congressional Budget Office did not endorse them. But its analysis carries weight on Capitol Hill because options it lists in such reports count as deficit reduction under congressional budgetary rules.
That has been used as the justification for numerous past proposals to adopt such changes, with the prospect ahead for a repeat as the new House leadership has made restrictions on federal spending a cornerstone of its agenda. Already there are expectations of such pressure in the months ahead as they plan to use the need to raise the federal debt ceiling as leverage. That ceiling actually already has been reached but the Treasury has used financial maneuvers that will stave off the true reckoning until perhaps early June.
Past budget plans with Republicans controlling the House have included language mirroring the options CBO raised. In the face of opposition from federal employee organizations and congressional Democrats—which would be expected if a new move is made—those proposals have largely fallen short of enactment.
The exception was that cut-down versions of plans for increasing FERS employee retirement contributions were enacted in 2012 and 2013. The result is that they pay either 0.8, 3.1 or 4.4 percent of salary toward their civil service annuity benefits depending on when they were hired.
Past proposals have called for equalizing the employee and government shares, which would result in an increase of about 6 percentage points for those paying 0.8 percent and proportionately less for those paying 3.1 or 4.4—with the government share meanwhile decreasing in tandem.
However, the latest report offers the option of setting the contribution at 4.4 percent for all FERS employees, to be phased in over four years for those not already paying that percentage. The government contribution would remain the same and, as with the increases already enacted, there would be no boost in benefits. (There would be no effect on CSRS employees, who now account for only several percent of the federal workforce.)
The option involving the FEHB is largely same as in the past, to replace the current system in which employees and retirees pay about 30 percent of total premium costs with the government paying the rest as the employer. It would create a “voucher” system in which the government share would be set at an initial flat dollar amount that would be increased only by a general inflation index, rather than the usually higher inflation in health care costs—shifting more of the total cost onto enrollees over time.
The report also repeats previously raised options such as limiting federal pay raises and various changes to Social Security including increasing the retirement age and raising the cap on Social Security payroll taxes. However, it does not include options raised in similar past reports such as basing future annuities on the retiree’s highest five consecutive salary years rather than the currently used three years—although they still could be raised in an upcoming deficit reduction effort on Capitol Hill.
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See also,
How Do Age and Years of Service Impact My Federal Retirement
The Best Ages for Federal Employees to Retire
