There’s no fiscal argument for cutting federal retirement benefits, other than a view that federal employees and retirees are over-compensated. Image: An Mazhor/Shutterstock.com
By: FEDweek StaffSome no-doubt warning signs in a federal workplace:
Senior executives and managers meeting off-site; Unfamiliar contractor employees coming through for closed-door meetings;
Junior HR staffers looking around… Printers in private offices springing to life… A proposal for “reforms” of federal employee benefits.
The first four of those commonly mean that budget cuts, a reorg, RIFs or other disruption is on the way. The last one also means, in a slightly different way, that the knives are out.
The most recent one came from the House Republican Study Committee, a caucus of the more conservative House Republicans—that is, almost all of them—in what amounts to putting a stake in the ground for this year’s budget cycle, now beginning after last year’s cycle went into six months of overtime.
Much of the attention to that report focused on its suggestion to raise the age at which full Social Security benefits can be drawn; the White House and Capitol Hill Democrats made sure that would be noticed.
An argument can be made that there is a need for at least considering that idea, since the Social Security trust fund will be exhausted in about 10 years, at which point the program will be able to pay only about three-fourths of currently promised benefits out of its ongoing income. While the document does not specify a target age, the last time the age was raised the increase was by two years—an increase that still is being phased in, now 30 years later.
Less noticed were recommendations involving federal retirement and health insurance benefits that would have a much stronger, and more immediate impact, than raising the Social Security retirement age. And there’s no current fiscal argument for doing so, other than to spend less on federal employees and retirees out of a view that they are over-compensated.
One of the proposals, like raising the Social Security full benefits age, would be prospective only. It would eliminate the civil service annuity portion of FERS and provide only the defined contribution TSP program for those hired in the future. That might come with increased employer contributions into those accounts for them—or it might not.
Another would address what the document terms a flaw in previous laws that required higher contributions by employees hired after the effective date. Those boosts had the effect of requiring employees hired in 2013 to pay 3.1 percent of their salary toward those benefits and those hired in 2014 and after to pay 4.4 percent, vs. 0.8 percent for those hired through 2012.
“This proposal would equalize the treatment for all federal workers,” it says. It gives no further details, but it surely doesn’t mean equalizing by having everyone pay just 0.8 percent.
Current employees also would be affected by eliminating the “special retirement supplement” which mirrors the amount of Social Security benefits earned through federal employment for those who retire before age 62 until they hit that age and can begin drawing Social Security at a reduced rate. That supplement, incidentally, most commonly is paid to law enforcement officers and firefighters, who are generally subject to mandatory retirement at age 57.
Also for current employees would be basing their future annuities on their highest five consecutive salary years rather than the currently used three. And both future retirees and current retirees would be affected by a proposal for “reducing or eliminating” inflation adjustments to annuities.
Both current employees and retirees also would be affected by a plan to change the FEHB health insurance program—and by extension the new, parallel program for postal employees and retirees beginning next year—to a voucher system. Rather than pay a percentage of premiums, the government would pay a flat rate and enrollees would have to make up the difference in premiums.
Not only that, newly hired employees would no longer be eligible to carry FEHB coverage into retirement. The reasoning behind that? “This is a benefit unavailable to virtually all private sector workers.”
Well, lots of aspects of federal employment don’t apply in the private sector, due to the nature of government work. Then again, lots of aspects of private sector employment—stock options, the potential for large bonuses and more—aren’t available to federal employees. But as any veteran federal employee knows, when outsiders start talking about “reforms,” the intended movement is always in just one direction.
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See also,
Legal: How to Challenge a Federal Reduction in Force (RIF) in 2025
How to Handle Taxes Owed on TSP Roth Conversions? Use a Ladder
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
