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Federal Times
Pay, benefits cuts coming
By STEPHEN LOSEY
Federal retirement benefits and paychecks are nearly certain to take a serious blow as
part of a deficit reduction deal now being finalized.
Details remain in flux and are hard to pin down, but the gist of what's to come is clear.
"I've abandoned all hope," John Gage, national president of the American Federation of
Government Employees, said last week. "I know we're gonna get crushed. It doesn't
seem we can do anything about it."
Among the likely hits to federal employees:
• Increasing paycheck contributions to pension programs, which would feel like a pay
cut. For current employees, the increase would likely be phased in over time, but details
are still being hammered out on the size of the increased contribution and the speed at
which it is phased in.
• Basing pension calculations on an employee's highest five salaries, instead of their
high three, which would reduce pensions.
• Using a so-called chained Consumer Price Index to calculate cost-of-living adjustments
to federal and military pensions and Social Security. The effect would be COLAs that are
about 0.25 of a percentage point lower than those calculated by the price index now used.
Colleen Kelley, president of the National Treasury Employees Union, said most
negotiations have focused on mandatory spending, which is why proposed changes have
been focused on federal pensions.
Discretionary spending is also likely to be cut severely as part of any deal, but Congress
will decide those details later. Discussions include a third year of federal pay freezes —
one more than the two years of freezes already approved by Congress, Kelley said.
Higher contributions to pensions
Gage said July 20 that under a plan forming in the House, new federal employees would
pay vastly more for their Federal Employees Retirement System defined-benefit
pensions: about 6 percent of their salaries, as opposed to the 0.8 percent that FERS
employees pay now.
Current employees, under both FERS and the Civil Service Retirement System, would
see their contributions rise gradually — an additional 0.5 percent of salary each year for
three years once the current pay-scale freeze expires, Gage said.
This would bring FERS contributions to 2.3 percent of salary, and CSRS employees —
who now contribute 7 percent to their pensions — would pay 8.5 percent.
Kelley said other phase-in options are being floated on Capitol Hill. For example,
lawmakers are also considering requiring new employees to contribute 5.5 percent to
their FERS pensions, and increasing current employees' contributions by 0.4 percent per
year for three years.
"Nothing is firm," Kelley said.
NTEU spokeswoman Dina Long said another proposal to change the Federal Employees
Health Benefits Program (FEHBP) to a "premium support" system also is on the table.
Under this plan, federal employees would get a fixed subsidy that they could use like a
voucher to pay their health care premiums. The government would increase the amount
of the subsidy each year by the percentage change in Gross Domestic Product plus 1
percentage point.
Critics say this would quickly shift health care costs to federal employees.
The White House deficit reduction commission, headed by former Sen. Alan Simpson
and former White House Chief of Staff Erskine Bowles, last December proposed testing
premium support on FEHBP, and possibly later expanding it to Medicare.
The Senate's bipartisan Gang of Six last week released its own $3.7 trillion deficit
reduction proposal. It calls for holding all federal health care spending — which would
include Medicare and FEHBP — to GDP plus 1 percentage point beginning in 2020.
President Obama said the plan appeared to present a balanced approach between
revenue increases and spending cuts and called it good news, though he stopped short of
endorsing it.
The Gang of Six's plan renewed some lawmakers' hopes that Congress could strike a
deal raising the debt ceiling before the Aug. 2 deadline.
Others, however, reacted coolly and said it didn't come close to adding up to $3.7 trillion
in cuts.
Sen. Tom Coburn, R-Okla., offered up his own sweeping $9 trillion deficit-reduction
proposal a day before rejoining the Gang of Six. His plan would cut both the federal and
contractor workforces by 15 percent, freeze pay and bonuses for a third year, freeze
locality pay for five years, and switch to the chained CPI.
Coburn also proposes prohibiting federal employees from carrying over unused sick
leave and vacation time into the next year. He would cap sick leave at 13 days a year and
vacation time at 30 days a year.
He also proposes eliminating the so-called "double dip" that allows some retirees to be
rehired by the government and be paid their full salary and full pension.
Aside from the chained CPI, there is no indication Coburn's proposals will be part of a
final deal.
Pay, benefits cuts coming
By STEPHEN LOSEY
Federal retirement benefits and paychecks are nearly certain to take a serious blow as
part of a deficit reduction deal now being finalized.
Details remain in flux and are hard to pin down, but the gist of what's to come is clear.
"I've abandoned all hope," John Gage, national president of the American Federation of
Government Employees, said last week. "I know we're gonna get crushed. It doesn't
seem we can do anything about it."
Among the likely hits to federal employees:
• Increasing paycheck contributions to pension programs, which would feel like a pay
cut. For current employees, the increase would likely be phased in over time, but details
are still being hammered out on the size of the increased contribution and the speed at
which it is phased in.
• Basing pension calculations on an employee's highest five salaries, instead of their
high three, which would reduce pensions.
• Using a so-called chained Consumer Price Index to calculate cost-of-living adjustments
to federal and military pensions and Social Security. The effect would be COLAs that are
about 0.25 of a percentage point lower than those calculated by the price index now used.
Colleen Kelley, president of the National Treasury Employees Union, said most
negotiations have focused on mandatory spending, which is why proposed changes have
been focused on federal pensions.
Discretionary spending is also likely to be cut severely as part of any deal, but Congress
will decide those details later. Discussions include a third year of federal pay freezes —
one more than the two years of freezes already approved by Congress, Kelley said.
Higher contributions to pensions
Gage said July 20 that under a plan forming in the House, new federal employees would
pay vastly more for their Federal Employees Retirement System defined-benefit
pensions: about 6 percent of their salaries, as opposed to the 0.8 percent that FERS
employees pay now.
Current employees, under both FERS and the Civil Service Retirement System, would
see their contributions rise gradually — an additional 0.5 percent of salary each year for
three years once the current pay-scale freeze expires, Gage said.
This would bring FERS contributions to 2.3 percent of salary, and CSRS employees —
who now contribute 7 percent to their pensions — would pay 8.5 percent.
Kelley said other phase-in options are being floated on Capitol Hill. For example,
lawmakers are also considering requiring new employees to contribute 5.5 percent to
their FERS pensions, and increasing current employees' contributions by 0.4 percent per
year for three years.
"Nothing is firm," Kelley said.
NTEU spokeswoman Dina Long said another proposal to change the Federal Employees
Health Benefits Program (FEHBP) to a "premium support" system also is on the table.
Under this plan, federal employees would get a fixed subsidy that they could use like a
voucher to pay their health care premiums. The government would increase the amount
of the subsidy each year by the percentage change in Gross Domestic Product plus 1
percentage point.
Critics say this would quickly shift health care costs to federal employees.
The White House deficit reduction commission, headed by former Sen. Alan Simpson
and former White House Chief of Staff Erskine Bowles, last December proposed testing
premium support on FEHBP, and possibly later expanding it to Medicare.
The Senate's bipartisan Gang of Six last week released its own $3.7 trillion deficit
reduction proposal. It calls for holding all federal health care spending — which would
include Medicare and FEHBP — to GDP plus 1 percentage point beginning in 2020.
President Obama said the plan appeared to present a balanced approach between
revenue increases and spending cuts and called it good news, though he stopped short of
endorsing it.
The Gang of Six's plan renewed some lawmakers' hopes that Congress could strike a
deal raising the debt ceiling before the Aug. 2 deadline.
Others, however, reacted coolly and said it didn't come close to adding up to $3.7 trillion
in cuts.
Sen. Tom Coburn, R-Okla., offered up his own sweeping $9 trillion deficit-reduction
proposal a day before rejoining the Gang of Six. His plan would cut both the federal and
contractor workforces by 15 percent, freeze pay and bonuses for a third year, freeze
locality pay for five years, and switch to the chained CPI.
Coburn also proposes prohibiting federal employees from carrying over unused sick
leave and vacation time into the next year. He would cap sick leave at 13 days a year and
vacation time at 30 days a year.
He also proposes eliminating the so-called "double dip" that allows some retirees to be
rehired by the government and be paid their full salary and full pension.
Aside from the chained CPI, there is no indication Coburn's proposals will be part of a
final deal.
| NTEU |
| JFK CHAPTER 153 |
| NTEU |
| JFK CHAPTER 153 |