As if the retirement crisis isn’t already bad enough, the budget proposal set to be announced next week will end up cutting federal employees’ retirement programs.
A report by the Washington Post finds that while the budget provides for a January 1.9 percent pay raise for civilian workers and a 2.1 percent hike for servicemembers, its retirement provisions will take away far more than it gives—or, as the report says, “would give to federal employees with one hand, while taking away with five others.”
The pay increase itself for the civilians is modest, but the changes to their retirement benefits aren’t—and they go in the opposite direction.
Among next year’s budget provisions is an increase in Federal Employees Retirement System contributions from workers by 1 percentage point each year, over a five-to-six-year span, until they equal the government’s contribution.
Over that time span, that would result in out-of-pocket payments increasing by about 6 percent. 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, the report says.
In addition, the budget would base future retirement benefits on the average of the five highest years of salary, instead of the current three highest; eliminate cost-of-living adjustments for current and future FERS employees; reduce the COLA for Civil Service Retirement System employees by 0.5 percent from what the formula would allow; and eliminate supplement payments for FERS employees who retire beginning in 2018. The supplement, the report says, 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, among them that those covered by CSRS do not receive Social Security benefits.
Republicans have been angling for most of these measures for years, according to the report, and with a Republican president in the White House the odds of most, if not all, of them ending up in the final budget are good—even if it’s not likely that Trump will get his way on every provision in the budget.
Naturally, federal employee leaders are livid over the proposed changes, with National Active and Retired Federal Employees Association President Richard Thissen calling Trump’s plan “beyond insulting” in the report. He is quoted saying, “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.”
According to Randy Erwin, president of the National Federation of Federal Employees, the increase in the FERS employee contribution would result in the average federal employee losing nearly $5,000 per year in take-home pay after the phase-in is finished. He is quoted in the report saying, “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.”
And there are other cuts in store for federal employees that will hit them before retirement cuts do—such as reductions in the federal workforce mandated by a March executive order and an Office of Management and Budget overhaul plan issued in April.