Feds Would Pay More Toward Pensions Under Proposal

Feds Would Pay More Toward Pensions Under Proposal

By Kellie Lunney; October 23, 2015

Rep. Scott Rigell, R-Va, introduced the bill. Rep. Scott Rigell, R-Va, introduced the bill. Carolyn Kaster/AP

Many federal employees would pay more toward their pension benefits under a new House bill aimed at providing relief from sequestration and protecting Medicare and Social Security.

Rep. Scott Rigell, R-Va., has introduced legislation that would restore 75 percent of the sequester spending cuts to defense and non-defense budgets with proposed savings and revenue elsewhere, including an increase in the amount of pay that federal employees hired before 2014 have to contribute to their pensions. Specifically, Rigell’s bill would apply the higher retirement contribution rates that federal employees hired in 2014 or later have to pay now to all federal workers under the Federal Employees Retirement System.

For many federal employees who currently contribute 0.8 percent, that would be a 3.6 percentage point increase per paycheck.

Continue reading “Feds Would Pay More Toward Pensions Under Proposal”

GOP Budget: Higher Pension Contributions for Feds, Much Lower Spending for Civilian Agencies

GOP Budget: Higher Pension Contributions for Feds, Much Lower Spending for Civilian Agencies

Rep. Tom Price, R-Ga., and other Republican members of the House Budget Committee release the 2016 plan.
Rep. Tom Price, R-Ga., and other Republican members of the House Budget Committee release the 2016 plan. Cliff Owen/AP

House Republicans have once again called on federal employees to contribute more to their retirement, bringing back the effective pay cut in their fiscal 2016 budget blueprint.

Following the precedent set by Rep. Paul Ryan, R-Wis., who no longer sits on the House Budget Committee, new Chairman Rep. Tom Price, R-Ga., included a pension contribution hike for feds as part of the $5.5 trillion in total savings the budget proposed over the next 10 years.

“In keeping with a recommendation from the National Commission on Fiscal Responsibility and Reform, this budget calls for federal employees—including members of Congress and congressional staff—to make greater contributions toward their own retirement,” thelegislative text stated.

While the plan did not specify exactly how much pension contributions would increase, the commission on fiscal responsibility – known as the Simpson-Bowles Commission – recommended “gradually” increasing federal civilian pensions “so that new federal employees ultimately pay about one-half the cost of their pensions, and existing federal employees pay one-quarter.”

A Budget Committee spokesman confirmed that the 50-50 split would amount to a 6.35 percent contribution level from feds, the same level Ryan’s budget recommended last year.

Congress has already raised the pension contribution level for newer employees twice in recent years, creating a three-tiered system in which employees pay between 0.8 percent and 4.4 percent of their paychecks toward their defined benefit, depending when they were hired.

More broadly, Price’s budget would officially maintain the across-the-board spending levels mandated by sequestration, but it would still boost Defense spending above the levels in President Obama’s fiscal 2016 budget request, through the use of additional funding in the Overseas Contingency Operations account technically reserved for emergency spending.

The plan did not spell out specific cuts to the federal workforce, but the cuts to non-defense agency budgets would likely result in hiring freezes and job losses. The plan would cut non-Defense funding by $759 billion below sequestration caps by 2025.

Rep. Chris Van Hollen, D-Md., ranking member of the House Budget Committee, said the Republican proposal represented the “same old, same old,” and it was “not a serious budget.”

Van Hollen said the blueprint would “wreak havoc with the services that civil servants provide to Americans across the country.”  On the proposed increase to pension contributions, he added, “This is just a huge hit on hardworking federal employees.”

Asked whether the Republican budget moved the needle closer to a sequestration avoiding compromise similar to the one agreed to in 2013 by Ryan and Sen. Patty Murray, D-Wash., the Democrats’ House Budget point man said it was more of a step backward. He went on to lament it was “too early to say” if the framework was a step forward for resuming regular order in the budget and appropriations process, and staving off the specter of a government shutdown in September.

The American Federation of Government Employees slammed the proposal, saying Republicans are “slashing the compensation and jobs of hard-working federal employees.”

“Federal employees aren’t some faceless bureaucrats to be cut at a whim,” said AFGE National President J. David Cox, in a statement. “They are real people with real jobs who make a real difference in the lives of millions Americans every day…They deserve our respect and admiration, not the contempt and derision being presented in this budget.”

The plan did note that the embattled Veterans Affairs Department would receive sufficient funding. Republicans also promised to maintain their tight oversight of the agency.

“We will continue to closely monitor the VA to make sure they are accountable and transparent in their work,” Price wrote.

The resolution identified areas of redundancy and called on agencies to reduce waste and increase accountability. Price added the overall, governmentwide funding cuts were simply a necessary rollback of unfettered growth in recent years.

“These reductions are hardly draconian,” Price said. “Washington cannot keep spending money it does not have.”

To further reduce spending to reach a balanced budget in 10 years, House Republicans also proposed significant cuts to Medicare and Medicaid, creating a premium support system for Medicare and block grants for Medicaid.

The military would not be completely exempt from cuts, either. While overall Defense spending would rise under the Republican plan, the blueprint still proposed reductions to compensation for military personnel and retirees. Price embraced therecommendations made by the Military Compensation and Retirement Modernization Commission earlier this year. The reforms, Price said, are “vital to sustaining the long-term fiscal health” of the military benefits.

“Under current law, if personnel compensation costs continue to grow as expected, they will inevitably crowd out critical defense spending on readiness and procurement,” Price wrote.

Senate Republicans plan to release their own budget Wednesday, and both chambers plan to vote on passage next week. Specific spending levels will then be determined during the annual appropriations process.

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”