Spared from Pension Hikes

Spared from Pension Hikes

  • By Tammy Flanagan National Institute of Transition Planning
  • December 13, 2013
martellostudio/Shutterstock.com

I’ve recently conducted several webinars, and each included a question-and-answer period at the end. But there were many more questions than I had time to answer. So I thought I’d address some of them here.

In the current fiscal environment and pressures of sequestration, how likely is it that changes will be made to the federal retirement rules and benefits in the next year or two?

I don’t like to be the one to say “I told you so,” but I did. I keep my optimism that Congress won’t make too many changes to the retirement benefits of federal employees since this group represents such a large voting population and federal employees are well-represented in in the political system by a variety of labor unions and associations. Continue reading “Spared from Pension Hikes”

Budget Deal Asks New Feds to Contribute More to Pensions

Budget Deal Asks New Feds to Contribute More to Pensions

“One of the most difficult challenges we faced as we worked through this, was the issue of federal employees and military,” said Sen. Patty Murray, D-Wash., during a press conference with Rep. Paul Ryan, R-Wis.
“One of the most difficult challenges we faced as we worked through this, was the issue of federal employees and military,” said Sen. Patty Murray, D-Wash., during a press conference with Rep. Paul Ryan, R-Wis. J. Scott Applewhite/AP

New federal employees and military retirees would have to contribute more to their pensions under the bipartisan deal the congressional budget conference committee unveiled Tuesday evening.

Federal workers hired on or after Jan. 1, 2014, with less than five years of service would have to pay 4.4 percent toward their defined retirement benefit — 1.3 percent more than the current 3.1 percent that employees hired after 2012 contribute.

Military retirees under the age of 62 would see a decrease, phased-in over the next two years, to the calculation of their cost-of-living adjustment, equal to inflation minus 1 percent. “This change would be gradually phased in, with no change for the current year, a 0.25 percent decrease in December 2014, and a 0.5 percent decrease in December 2015,” according to a summary of the deal. The change would not affect service members who retired because of injury or disability. Continue reading “Budget Deal Asks New Feds to Contribute More to Pensions”

CBO —Option 36 Increase Federal Civilian Employees’ Contributions to Their Pensions

OPTIONS FOR REDUCING THE DEFICIT: 2014 TO 2023

Revenues—Option 36

Increase Federal Civilian Employees’ Contributions to Their Pensions

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Revenues 0.6 1.4 2.1 2.2 2.2 2.2 2.2 2.2 2.1 2.1 8.5 19.3

Note: This option would take effect in January 2014.

The federal government provides most of its civilian employees with an annuity in retirement through either the Federal Employees Retirement System (FERS) or its predecessor, the Civil Service Retirement System (CSRS). Those annuities are jointly funded by the employees and the federal agencies that hire them. About 85 percent of federal employees participate in FERS, and most of them contribute 0.8 percent of their salary toward their future annuities. The Middle Class Tax Relief and Job Creation Act of 2012 increased the contribution rate to 3.1 percent for most employees hired after December 31, 2012. Federal employees who are still covered by CSRS generally contribute 7 percent of their salary and accrue larger annuities. Agency contributions for FERS and CSRS do not have any effect on total federal spending or revenues because they are intragovernmental payments, but employee contributions are counted as federal revenues. (Annuity payments made to FERS and CSRS beneficiaries represent federal spending.) Continue reading “CBO —Option 36 Increase Federal Civilian Employees’ Contributions to Their Pensions”

CBO Mandatory Spending—Option 10 Reduce the Amounts of Federal Pensions

Congressional Budget Office

Supporting the congress since 1975

November 13, 2013

OPTIONS FOR REDUCING THE DEFICIT: 2014 TO 2023

Mandatory Spending—Option 10

Function 600 – Income Security

Reduce the Amounts of Federal Pensions

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Outlays
Military retirement 0 * * -0.1 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.2 -2.1
CSRS and FERS 0 * -0.1 -0.2 -0.2 -0.4 -0.5 -0.6 -0.7 -0.8 -0.5 -3.5
Total 0 * -0.1 -0.2 -0.4 -0.5 -0.7 -1.0 -1.2 -1.3 -0.8 -5.5

Notes: This option would take effect in January 2015.

* = between -$50 million and zero; CSRS = Civil Service Retirement System; FERS = Federal Employees Retirement System. Continue reading “CBO Mandatory Spending—Option 10 Reduce the Amounts of Federal Pensions”

Impact of budgetary hit to federal retirement weighed

Impact of budgetary hit to federal retirement weighed

Requiring federal employees to pay more toward their retirement benefits would have an uncertain effect on recruitment of new workers but likely would spur some current employees to leave earlier than they would have otherwise, according to a recent analysis done for Congress.

Increasing the required contributions, and the potential impact of doing so, has been under consideration in negotiations over budget levels for the remainder of the current government fiscal year and for fiscal 2015.