Trump’s Budget Calls for Hits on Federal Employee Retirement Programs
“If this change is made, federal employees will no longer have a secure retirement.”
The Washington Post, By Joe Davidson | Columnist May 18
The budget proposal President Trump plans to unveil Tuesday would give to federal employees with one hand, while taking away with five others.
It calls for a 1.9 percent pay raise in January for civilian workers and a 2.1 percent hike for the military.
But in real terms, the civilian increase would be less than it looks if proposed hits on retirement benefits are adopted. Trump’s fiscal 2018 budget would:
Increase Federal Employee Retirement System (FERS) contributions from workers by 1 percentage point each year until they equal the government’s contribution. This would take five to six years and would result in increased out-of- pocket payments of about 6 percent over that period. Out-of-pocket payments by federal law enforcement officers would increase by the same amount, but would not equal the greater contributions from law enforcement agencies.
Base future retirement benefits on the average of the high five years of salary instead of the current high three
Eliminate cost of living adjustments (COLA) for current and future FERS employees
Cut the COLA for Civil Service Retirement System (CSRS) employees by 0.5 percent from what the formula would allowed
Eliminate supplement payments for FERS employees who retire beginning in 2018. The supplement approximates the value of Social Security benefits for those who retire before age 62.
FERS, which covers employees first hired after 1986, and CSRS have different requirements. Those covered by CSRS, for example, do not receive Social Security benefits.
Senior Office of Management and Budget officials, who declined to be identified because the budget has not been released, said that the increase in retirement contributions would not apply under CSRS because the employer and employee shares under that system already are equal.
Similarly, they said that eliminating the FERS retirement inflation adjustment while only reducing it for those retired under CSRS takes into account that FERS retirees receive Social Security, which is fully inflation-adjusted, as part of their benefits.
The retirement changes supposedly would take effect with the fiscal year that begins in October. Since the federal budget rarely is finished by that deadline, any measure including them likely would set a different effective date.
Most of these proposals have been in the Republican playbook for years. With that party now in control of the White House and Congress, chances increase that some or all of them will become law, even as the probability is low that Trump’s entire budget will be enacted as proposed.
The thought of Trump’s assault on federal retirement programs becoming law enrages federal employee leaders.
National Active and Retired Federal Employees Association President Richard Thissen called Trump’s plan “beyond insulting. It is downright mean. Simultaneously promoting tax cuts and forcing a tax on just federal employees, through an increase in retirement contributions, is the height of hypocrisy.”
The OMB officials emphasized that it is not only federal retirement that would face sacrifice under the spending plan.
“We’re all in the soup together,” said one, as they noted other shared “hard choices” in the budget.
But the soup is deeper and has been brewing longer for federal employees.
A preliminary budget document released in March called for a domestic discretionary budget decrease of $54 billion, with an equal increase for defense, homeland security and veterans. Nineteen 19 small agencies would be eliminated, along with their workforces.
Beyond the budget’s retirement hits, reducing the number of federal employees would result from other budget cuts, a March executive order on reorganizing government and OMB’s plan for reforming government and reducing the federal workforce issued in April.
Going back to the Obama administration, feds have been “singled out,” said National Treasury Employees Union President Tony Reardon. They have “contributed more than $20 billion to deficit reduction through increased retirement contributions, and more than $182 billion overall from combined retirement, pay cuts, and unpaid furlough days in the past few years,” he added.
Administration officials pointed out that there would be no hits on federal employee health insurance or the Thrift Savings Plan and argue retirement benefits would remain relatively good under the Trump proposal.
“We’re still going to be very generous. There’s still going to be a big gap” compared to the private sector, said one OMB official, noting a recent Congressional Budget Office report. It said on average “the cost of benefits was 47 percent higher for federal civilian employees than for private-sector employees.” It attributed much of that difference to better retirement benefits for feds.
Federal employee leaders, however, are not buying that “very generous” line.
“This is an outrageous attack on middle class workers,” Reardon said. “NTEU strongly objects to further attempts to increase employee retirement contributions, which are effectively a substantial pay cut.”
Basing retirement on the “high-five” instead of the “high-three” means “federal employees are rightfully going to be livid about these proposed pension cuts,” added Randy Erwin, president of the National Federation of Federal Employees.
Increasing the FERS employee contribution would result in the average federal employee losing nearly $5,000 per year in take home pay, that’s per year after the phase-in is finished, he estimated. “Phasing this outrageous pension cut in over several years does not make it any more palatable. If this change is made, federal employees will no longer have a secure retirement. Period.”
Staff writer Eric Yoder contributed to this report.
Republicans gearing up for major changes to federal pay and benefits
Federal New Radio, By Nicole Ogrysko | @nogryskoWFED
May 18, 2017 7:19 pm
5 min read
Republican lawmakers and the White House are determined to make major changes to the federal pay and benefits. President Donald Trump’s 2018 budget proposal may offer the first details of what federal employee groups and Democratic lawmakers have feared over the last several years.
Jacqueline Simon, policy director at the American Federation of Government Employees, told House lawmakers Thursday that the President’s 2018 budget proposal may include changes to the way retirement annuities are calculated, and it may also potentially ask that Federal Employee Retirement System (FERS) participants contribute more toward their defined benefit plans.
According to a Democratic aide, the President’s budget “will propose items that are fundamentally anti-federal employee, including proposing drastic changes to the retirement system that will impose steep costs on active employees and retirees.”
An Office of Management and Budget spokesman said the President’s budget will be released Tuesday and exact details will be known then.
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Several local lawmakers said they were unaware of the proposals or didn’t know the details.
The President’s budget is merely a proposal, and congressional appropriations committees will review and offer their suggestions.
This comes on the heels of discussions in the House Oversight and Government Reform Committee, which took its first step Thursday toward navigating the rough waters of the federal compensation system.
“We are going to have civil service reform,” said Government Operations Subcommittee Chairman Mark Meadows (R-N.C.), who led the full committee hearing May 18 while Chairman Jason Chaffetz (R-Utah) recovers from surgery. “The testimony that all of you have here today will play a factor in that.”
Yet as Meadows recognized, the witnesses had vastly different opinions about the state of the federal compensation system, the studies that different entities have produced on the topic and what the results mean.
He asked the Congressional Budget Office, which most recently updated its study on federal compensation and how it compares to the private sector, to conduct a new review on the topic. The new study should include other aspects of federal compensation that organizations like the Heritage Foundation and American Enterprise Institute say were left out of CBO’s original review.
Congress asks: Are federal employees overpaid?
“I’d like to use this hearing to not only get at the facts, but also get an action plan where we can work in a bipartisan way to make sure that people are fairly compensated, but also to make sure that there’s an incentive there to not only attract new federal workers but also to make sure that the very thing that we’re working for does not become a disincentive,” Meadows said. “What I’ve heard over and over and over again is that you have people who work very hard and you have those who don’t, and yet the compensation doesn’t seem to be commensurate with that.”
The witnesses and lawmakers rehashed familiar arguments:
Some say federal employees are overpaid and over-compensated. The civil service system, they say, favors employees with the longest tenure but not the highest performance, and agencies simply lack the tools they need to get rid of those poor performers.
“[They] get paid better, [have] better pensions, cheaper health care, better overall benefit package, sick leave, all those kinds of things,” said Rep. Jim Jordan (R-Ohio). “And you can’t fire them. And 99.1 percent of them get an A-, an A or an A+ on their performance [evaluation]? Wow. That’s amazing.”
Jordan referenced a 2013 Government Accountability Office study, which found that 99 percent of permanent, non-senior executive service employees received a rating of “fully successful” on their performance evaluations.
Yet others say government should offer generous benefits, and it shouldn’t stoop to the private sector’s level. Even still, some agencies have difficulty recruiting top-tier IT, cybersecurity and medical professionals.
“What we offer our federal employees is a model and a standard, that we ought to be thinking about how we can get the private sector to raise its standards up to that level,” said Rep. John Sarbanes (D-Md.)
Rachel Greszler, a research fellow in economics, budget and entitlements for the Heritage Foundation, argued that the compensation gap between the federal and private sectors may be larger. The CBO study, she said, didn’t measure the childcare and transportation benefits and student loan repayment options that some federal employees earn.
“Those are things that are incentives for people to work for us,” Cummings said. “We need to be racing to the top.”
Overall, CBO found that government spends about 17 percent more compensating federal employees compared to their counterparts in the private sector.
In total, federal employees with a high school diploma or less earn on average 53 percent more than their counterparts in the private sector, while federal workers with a bachelor’s degrees received 21 percent more in compensation.
In contrast, total compensation costs for employees with a professional degree or doctorate were 18 percent lower than workers in the private sector, CBO said.
And others, such as GAO, say the debate over federal compensation misses other key aspects of the “civil service reform” conversation.
“Pay is not the only thing,” said Robert Goldenkoff, director of strategic issues at GAO. “Even if we could assume for the moment that we could come up with the ideal pay system, it still does no good if your on-boarding processes are inadequate, if you don’t make effective use of their talents, if you don’t aggressively recruit them, if once they do come on board you don’t develop them [and] they’re not given effective supervision. It’s also a matter of work-life balance programs, and it needs to be tailored to individual labor markets. It needs to be tailored to individual occupations. We’re just not doing that effectively right now.”
Meadows said he would try to keep the hearing non-political, and suggested that other committee members make visits to federal agencies, as he’s done over the past few years.
But the rest of the committee didn’t often follow suit.
Instead, many members delved into other questions on official time, the Affordable Care Act and the committee’s priorities in general. Cummings spoke of arguments over the witness list for the hearing.
“These hearings can many times be construed as taking one direction or another and I have committed, not only to my colleagues to my right, to make sure that we get it right for the federal workforce,” Meadows said.
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2 Articles on Pay and Benefits
“If this change is made, federal employees will no longer have a secure retirement.”