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House bill would increase pension contributions by 5% of pay

Apr. 30, 2012 - 05:18PM   |  
By STEPHEN LOSEY   |   Comments
The House Oversight and Government Reform Committee last week voted to cut future employees' Social Security supplements as required by the House fiscal 2013 budget authored by Rep. Paul Ryan, R-Wis.
The House Oversight and Government Reform Committee last week voted to cut future employees' Social Security supplements as required by the House fiscal 2013 budget authored by Rep. Paul Ryan, R-Wis. (Win McNamee / Getty Images)

The House Oversight and Government Reform Committee last week voted to increase federal employees' pension contributions by 5 percent of pay and cut future employees' Social Security supplements.

The cuts required by the House fiscal 2013 budget authored by Rep. Paul Ryan, R-Wis. probably won't pass the Democrat-controlled Senate. But House Minority Whip Steny Hoyer, D-Md., told Federal Times that the contribution increases could return, perhaps as part of a bill that Democrats cannot reject.

"I think it's likely that it may well come back," Hoyer said. "That's not fair policy. That's not balanced policy. That's not policy which is going to lead to the sense among federal employees that they're being treated fairly, and if they don't, morale is going to sink. Younger people who may opt to go into federal service when we experience vacancies in critical jobs, they'll be disinclined to do that if we don't treat them fairly."

But committee chairman Darrell Issa, R-Calif., said the changes are necessary to help the government rein in runaway spending.

The changes to federal pension contributions, which the committee passed April 26, would effectively mean a 5 percent pay cut for federal employees.

Federal Employees Retirement System (FERS) employees' contributions would increase from 0.8 to 5.8 percent by 2017, and Civil Service Retirement System (CSRS) employees' contributions would increase from 7 to 12 percent over the same period.

The bill would increase pension contributions by 1.5 percentage points in 2013, 0.5 percentage points in 2014, and one percentage point each year from 2015 to 2017.

Starting in 2013, newly hired federal employees with less than five years of previous federal service would immediately have to cover 5.8 percent of their FERS pensions, with no phase-in.

The 5 percent pay cut would cost the average federal employee $3,350 a year, based on the average salary figures published in January by the Congressional Budget Office.

Lawmakers and their staffs under CSRS, and FERS lawmakers, would see their contributions go up even more, by 8.5 percentage points over five years. FERS congressional staffers' contributions would increase 7.5 percentage points over five years.

For new employees hired after Dec. 31, the measure would eliminate the FERS Social Security supplement that is available to employees who voluntarily retire before reaching age 62.

Republicans on the House Oversight Committee said the cuts would save $82 billion over a decade more than the $79 billion it was ordered to cut over 10 years as part of the Ryan budget, which the House passed March 29 on a largely party-line vote.

Federal employees and Democratic lawmakers denounced the plan to hike feds' contributions.

"These retirement cuts are absolutely unconscionable," said National Federation of Federal Employees National President Bill Dougan. "At a time when many federal workers and their families are struggling through the great recession, some in Congress are proposing to increase six-fold the amount they pay toward their retirement. Burdened with two years of frozen pay, increased pension contributions for new hires and crushing cuts to agency budgets, federal employees are reaching the end of their rope."

The American Federation of Government Employees noted that FERS employees will still be expected to pay Social Security taxes, which are usually 6.2 percent, but are currently 4.2 percent due to the payroll tax holiday.

And AFGE said that drastically increasing employees' contributions will force them to reduce their Thrift Savings Plan contributions.

For FERS employees, whose employing agencies match their TSP contributions up to 5 percent, that will mean losing out on crucial agency contributions and hurting their future TSP nest egg.

"Employees will pay far more now and are virtually guaranteed to receive much less when they retire," AFGE said.

Rep. Gerry Connolly, D-Va., said the bill "will die a deserved death when it gets to the Senate. It is wrong."

But federal pay and benefits have been used as a bargaining chit before. In February, lawmakers struck a deal to pay for a payroll tax holiday extension by raising the pension contributions for newly hired federal employees to 3.1 percent.

With the government's budget being stretched to the brink, the 5 percent pay cut could be used later this year to cover another spending priority.

Hoyer said repeatedly cutting federal pay and benefits is "shortsighted" and will severely damage the federal government's ability to recruit and retain talented nurses, intelligence analysts, law enforcement officers and food inspectors.

"Republicans' priorities are crystal clear, and investing in a top-notch workforce competitive with the private sector is not among them," he said in a Federal Times opinion piece.

Federal employees are already under a two-year pay scale freeze, which is expected to cost them $60 billion over a decade. President Obama has proposed a 0.5 percent pay raise in 2013 to break the freeze, which would be the smallest raise in the General Schedule's six-decade history.

But many Republican lawmakers want to extend the pay freeze at least one more year costing feds about $30 billion more and Hoyer said they might succeed.

"I'll oppose it," Hoyer said. "Extending the pay freeze for a third year will be a tough thing for federal employees. If we continue along that path, we'll be unable to recruit and retain the kind of people we need to run our government effectively."

The committee last week also agreed to a bipartisan amendment, from Rep. Jason Chaffetz, R-Utah, and Rep. Stephen Lynch, D-Mass., to allow federal employees to apply the value of their unused annual or vacation leave toward their TSP accounts.

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