Government Executive
Budget Deal Asks New Feds to Contribute More to Pensions
By Kellie Lunney
December 10, 2013
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. gThis 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,h according to a summary of the deal. The
change would not affect service members who retired because of injury or
disability.
The proposal also caps the amount the government can reimburse contractors
for executive compensation at $487,000. The current cap is more than
$900,000.
The deal requires new civilian federal workers and military retirees to
contribute $12 billion in savings overall -- $6 billion from each group -- to
help partially repeal the sequester for fiscal 2014 and fiscal 2015. That $12
billion figure is part of the total proposed $63 billion in savings to offset
the automatic spending cuts for two years.
Current federal employees managed to emerge unscathed. Initial reports of
the deal said current federal workers would have to contribute $20 billion
overall to the budget savings, prompting federal employee unions and other
advocacy organizations, as well as the Washington-area congressional delegation,
to push back hard against such a proposal.
gOne of the most difficult challenges we faced as we worked through this, was
the issue of federal employees and military,h said Sen. Patty Murray, D-Wash.,
during a press conference with Rep. Paul Ryan, R-Wis., on Tuesday. The two led
the budget conference negotiations. gAnd Congressman Ryan and I have worked on
this a lot,h she added. gHe is a tough negotiatorcand it started out very high
at $20 billion; it is now down to $6 billion for federal employees, and $6
billion for military.h
Rep. Chris Van Hollen, D-Md., ranking member of the House Budget Committee
and a member of the conference committee, reportedly played a major role in
reducing the amount federal workers had to sacrifice. Van Hollen has a large
federal employee constituency.
Workers in the Federal Employees Retirement System hired in or before 2012
contribute 0.8 percent to their defined retirement benefit, or pension; those in
the Civil Service Retirement System now contribute 7 percent. A 2011 law
requires feds hired after 2012 and those with fewer than five years of previous
federal service to contribute
3.1 percent toward their pensions. CBO has estimated that the change to
post-2012 hiresf pension contributions will save the government approximately
$15.5 billion from 2012 through 2022; those savings are separate from the
savings unveiled by Ryan and Murray on Tuesday.
If Congress approves the budget deal, then federal workers will have
contributed roughly $120 billion to deficit reduction, which includes the
three-year pay freeze.
Ryan said it was gonly fairh to taxpayers who help subsidize federal
employeesf pensions to ask feds to contribute more. gSo, what we are asking
here, is that the people who work for the federal government -- and we thank
them for their work, they are hardworking dedicated people that we respect --
but we think itfs only right and fair that they pay something more toward their
pensions just like the hardworking taxpayer that pays for those pensions in the
first place,h said Ryan.
The $85 billion savings package announced by Murray and Ryan would fund the
government past Jan. 15, 2014, averting another shutdown and setting spending
levels for the next two years.
gIf Chairman Ryan and I did not reach an agreement, we would be at sequester
level very shortly, and many of these same people [federal employees] would be
facing furloughs, layoffs and uncertainty,h Murray said. gWe have brought
certainty back to all those people.h
The dealfs future remains uncertain in Congress, especially given many
Democratsf opposition to increasing the amount federal workers pay toward their
pensions as well as the aversion from Republican and Democratic lawmakers to
tinkering with the military retirement system.
gThis agreement isnft perfect, but it is certainly better than no agreement
at all,h Van Hollen said in a statement. gThis difficult negotiation has gone
through many phases. The final product replaces part of the job-killing
sequester without disproportionally hitting working families, including hundreds
of thousands of public servants.h
National Treasury Employees Union President Colleen Kelley offered tempered
praise for the deal.
gWhile we think federal employees continue to contribute a disproportionate
amount to deficit reduction and should not be included in this package, there is
recognition in this deal that current federal employees already sacrificed again
and again,h she said in a statement. gI am disappointed that the budget deal
announced today proposes increases to federal employee retirement contributions
for new hires; however, I am glad to see the numbers were significantly reduced
from original proposals and that these retirement increases will not impact
current employees.h
By Kellie Lunney
December 10, 2013
http://www.govexec.com/pay-benefits/2013/12/budget-deal-asks-new-feds-contribute-more-pensions/75299/