Prospect of Retirement, Other Benefit Cuts Moves Ahead

The House and Senate appear to be headed toward a conference soon on a budget outline that could require committees overseeing federal employee and retiree benefits to achieve savings in those programs.

The Senate Budget Committee has approved its version of a budget “resolution” for the fiscal year already under way, which does not specifically order savings from civil service benefits. That measure primarily is designed to serve as the authority for that chamber to approve a planned revision of tax policy with only a simple majority. The full Senate could take up the resolution as soon as next week, after returning from a week off.

However, to put that authority in place the two chambers would have to agree on one version and then vote again. That would require working out differences with the House version, which orders spending cuts in numerous federal programs, including instructing the Oversight and Government Reform Committee to produce $32 billion in savings over 10 years in programs under its control–essentially meaning federal retirement and health insurance.

The House-passed measure suggests–but does not mandate–achieving that goal by: increasing required contributions toward retirement benefits; eliminating the “special retirement supplement” paid to those under FERS who retire before age 62 and until that age when they can draw Social Security; limiting the increase in the government share of FEHB premiums to general inflation, rather than the usually higher inflation in health care, shifting more of the burden onto enrollees; reducing the government share of FEHB for retirees who had shorter working careers; decreasing the rate of return, and thus the interest cost to the government, in the TSP’s G fund; and reinstating a partial hiring freeze, with the goal of cutting employment by 10 percent over an unspecified period. It also assumes that employees hired in the future would not receive a defined benefit annuity, with possibly an increased government contribution to their TSP accounts.

However, specifics would be up to the civil service committees, which also have before them options including two the White House proposed earlier this year: basing benefits for future retirees on a high-5 salary base rather than the current high-3, and reducing COLAs for CSRS retirees and eliminating the COLA on the civil service portion of FERS benefits.

Enacting such provisions into law, should Congress ultimately agree to order those savings, would require going through a separate process whose outcome is far from guaranteed. Also, due to the difficulty of enacting such changes, Congress might agree to a stripped-down version of the measure focusing only on the tax issues–or agree to the House provisions but then not actively pursue them.