Employee organizations have latched onto a change in control in the House as their opportunity to address two “bugs” in federal retirement – by paying full FERS COLAs immediately and rolling back required contributions increases so that all pay the traditional 0.8 percent.
Bugs in the System
“We’re working on getting the bugs out of the system.” How many times have you heard that? Maybe your agency’s new computer system has everyone throwing up their hands, or maybe it’s something that affects you both personally and in your career such as your retirement benefits.
There’s a strong presumption in the federal government for equitable treatment of its workforce but when it comes to retirement benefits, the treatment of federal employees is far from equal. And it’s rare that political leaders are willing to spend the time to understand those bugs and try to do something about them.
Now is one of those times.
The mid-term elections switched control of the House from Republican to Democratic and in the process sent nearly 100 new members to Washington — new members who mostly know little to nothing about federal retirement – and that is an opportunity because they can be taught. For example, 10 years ago a change in control of the House triggered a burst of activity on federal retirement aimed at getting bugs out of the system — bugs that had persisted despite years of recognition that they were there.
There was a relatively minor change involving CSRS benefits for those who worked part-time later in their careers, but the major ones involved FERS. One allowed FERS employees who left, withdrew their retirement contributions, and later returned to government to recapture the prior years of service toward their annuities by repaying the money with interest, an option always available under CSRS. The other allowed crediting of unused sick leave at retirement toward a FERS annuity—although phased in—also always allowed under CSRS.
At the time, even those who had been involved in the creation of FERS in the 1980s could not say for sure why those two differences existed, and there was virtually no record of a reason, either. What there had been until 2009 was inertia, which took a shakeup in Washington to jolt loose.
That didn’t exterminate all the bugs, but the change to Republican control of the House the next year stopped the momentum.
Several remaining bugs include the difference in COLA policy between the two systems. While CSRS retirees are eligible for full inflation adjustments regardless of age, under FERS non-disability retirees are not eligible for any COLA until age 62, and even then their adjustment is reduced if the base COLA is above 2 percent.
Also, because of laws enacted in 2012-2013—a time of heightened concern about the federal budget deficit—FERS employees now pay one of three levels of contributions toward their retirement, depending on the year they were hired. That’s either 0.8 toward their civil service benefit if hired before 2013—or if hired afterward with at least five years of prior service time—3.1 percent if hired during that year, and 4.4 percent if hired after that year. All for the same level of benefits.
Employee organizations have latched onto the new change in Congress as their opportunity to address both of those issues, by paying full FERS COLAs immediately and rolling back the required contributions increases so that all pay the traditional 0.8 percent.
The NAREFE organization, for example, says that the 1980s compromise that resulted in the restrictive FERS COLA policy “was the wrong policy then, as it is now. It is past time for Congress to ensure that FERS retirees receive a full COLA each year.” And those groups have convinced the new leaders of the House Oversight and Government Reform Committee to attempt to reverse the required contributions increase, as happened with a smaller increase that was imposed, then lifted in the late 1990s.
With Republicans still in control of the White House and the Senate, such changes must be considered a long shot. Through this year, the GOP has advocated the opposite—further increasing required contributions and further restricting COLAs. The most likely outcome is deadlock.
But anyone thinking in terms of changing federal retirement policy has to have a long-term strategy. This could be the time to lay the groundwork, to make the case now for taking action even if the situation does not lend itself to taking that action now.
There are all those new members—regardless of party—who can be convinced now, that these are not just minor differences, they are injustices. Members who need to—to get re-elected—demonstrate that they are making good on their promise to fix what’s broken about the government. There are incumbents who could be held to account for why they haven’t done anything in all this time, and who could be reminded that they can be replaced. The 2020 elections are less than two years away.