In April, Representative James Comer (R-KY) announced a series of proposals that would force many federal civilian employees to pay higher premiums for retirement benefits and to lower their benefits by changing the formula for calculating payments, and last week the House Committee on Oversight and Accountability approved, by a narrow vote, to advance the proposals.
Last Wednesday’s vote now advances the bill to the House Budget Committee, where it may face resistance from Republican lawmakers who might be reluctant to cut benefits for federal workers.
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The series of retirement cuts will likely be included in a GOP budget reconciliation bill, which aims to extend President Donald Trump’s 2017 tax cuts and cut government spending, and will likely be considered by the House of Representatives prior to the Memorial Day recess, despite Rep. Mike Turner’s (R-OH) objections. “I do not believe that this bill … represents American values,” Turner said. “I believe that making changes to pension retirement benefits in the middle of someone’s employment is wrong. Employee benefits are not a gift. They are earned.”
Since federal employee pensions are too generous compared to the private sector, "the House Oversight Committee is taking a critical step to advance President Trump’s America First agenda and ensure taxpayer dollars are used effectively, efficiently, and responsibly,” Comer said in a statement.
The biggest change would be to raise the premium many long-time federal and postal employees pay out of their salaries in the Federal Employee Retirement System, which is a three-tiered retirement plan: Social Security Benefits, Basic Benefits Plan and Thrift Savings Plan Benefits, a defined contribution retirement plan.
The new proposal would raise the retirement contribution rate “up to the new rate of 4.4% of their salary,” according to Rep. Comer. Presently, more than half of federal employees are paying at the 4.4% rate.
Under the current system, contribution rates would be arranged according to the year an employee started: 0.8% in 2012 or before; 3.1% if hired in 2013, and 4.4% if hired in or since 2014. The change would have employees pay 4.4% of their salary, which could raise $30.7 billion over a decade, according to the statement.
Comer said in a statement that the committee’s proposal would achieve a “reduction in the federal deficit of over $50 billion.”
The proposal would also try to save $4.75 billion by basing a retiree’s annuity payment on the highest five years of salary (instead of the current three highest years). Those benefits are calculated based on top salary received and number of years in the US workforce.
Other changes being proposed include eliminating the “additional retirement annuity payment for those eligible to retire before age 62” and are unable to yet collect Social Security benefits,” according to the proposal (except those in federal occupations subject to mandatory early separation), as well as auditing family members of federal employees to see if they are eligible for health benefits on their family member’s health coverage.
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The American Postal Workers Union is opposed to the new proposal. “The time to act is now to save our pensions,” said APWU Legislative and Political Director Judy Beard. “We are actively engaging with lawmakers on this fight.”
The American Federation of Government Employees is also opposed to the pension cuts. “Cutting federal employee benefits and weakening workplace rights will not come close to offsetting the $4.5 trillion cost of tax cuts over 10 years,” AFGE acting Legislative Director Daniel Horowitz wrote in a letter to the committee.
The new proposal does not mention the Civil Service Retirement System, which is a retirement plan for federal employees who were hired before January 1, 1984 that provides an annuity for life.
The pension reconciliation package will now advance to the House floor and, potentially, to the Senate.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
