The White House’s budget proposal for 2019, released Monday, would cut the Labor Department’s funding by more than 20 percent.

The budget requests $9.4 billion for Labor, down from its $12 billion budget for 2017. Only the State Department and the Environmental Protection Agency would see bigger cuts, as a percentage, under the White House’s plan.

“The budget improves the quality of life for all workers by making targeted, evidence-based investments to help workers get ahead and by eliminating duplicative, wasteful, and non-essential activities,” according to the document.

Allocations to the Employee Benefits Security Administration, the arm of Labor that oversees workplace retirement and health care plans, are not laid out in the budget.

But the budget proposes addressing the impending insolvency of the Pension Benefit Guaranty Corp.’s multiemployer insurance program by raising premiums on collectively bargained defined benefit plans.

Approximately $16 billion would be raised by new premiums over the 10-year budget window, making the program “more likely than not to remain solvent over the next 20 years,” the proposal estimates.

Last year, the White House’s proposed budget introduced a new variable rate premium for underfunded multiemployer plans, but it did not specify what the new rate would be. PBGC’s multiemployer insurance program has a funding deficit of more than $65 billion, according to the agency’s 2017 annual report.

The White House’s 2019 budget would also make substantial changes to the Federal Employees Retirement System, the defined benefit pension that more than 90 percent of federal workers participate in.

Under the proposal, employee contributions would increase 1 percent annually until participants were paying 50 percent of the total cost of contributions.

Most participants in the FERS pension contribute 0.8 percent of the their salary, according to the Congressional Budget Office. Employees hired after 2012 pay a much higher contribution—3.1 percent for those hired in 2013, and 4.4 percent for those hired in 2014.

The proposal would also eliminate cost of living adjustments for retired beneficiaries.

And it would change the benefit calculation from averaging the three highest years of salary to the average of the five highest years of salary, which would have the affect of lowering monthly pension payments.

Under the current formula, benefits are calculated by multiplying years of service with 1 percent of the average of the three highest years of salary.

The proposal also eliminates the Special Retirement Supplement for the FERS pension, which is given to workers with 30 years of service who retire before age 62.

Participant contributions in the FERS pension plan are counted as federal revenues. According to the White House, changes in the system would save $68 billion over 10 years.

The proposed budget also reduces the interest rate on the G-Fund, the short-term U.S. Treasury security specially issued to the federal Thrift Savings Plan, the defined contribution plan offered to federal employees along with the FERS defined benefit plan.

“G Fund investors currently benefit from receiving a medium-term rate of return on what is essentially a short-term security,” according to language in the budget proposal. “Basing the yield on a short-term T-bill rate instead of the current rate (an average of medium and long term Treasury bond rates) would reduce both the projected rate of return to investors and the cost of the fund to the Treasury.”

Last year’s budget proposal also included similar cuts to federal retirement plans. But federal employee unions were able to successfully lobby Congress to maintain the existing benefits programs.

Instant Insights /

Trump&rsquo;s budget slashes Labor&rsquo;s funding, raises multiemployer premiums, reduces federal pensions

More From HR Executive

Related Stories

Recommended For You

Trump’s budget slashes Labor’s funding, raises multiemployer premiums, reduces federal pensions