Employee groups assail proposal to increase pension contributions

Legislation that would increase the amount government workers contribute to their pensions drew renewed fire Monday from federal employee advocates.

The House Oversight and Government Reform Committee plans to mark up a bill Tuesday afternoon that would increase feds’ contributions to their pensions by a total of 1.5 percent over three years beginning in 2013. The legislation also would eliminate a current provision in the law that supplements the retirement benefits of feds covered under the Federal Employees Retirement System who retire before age 62, the age at which their Social Security benefits typically kick in.

The average federal pension under FERS is between $12,000 and $13,000 per year, according to the Office of Personnel Management, while the typical pension under the Civil Service Retirement System is around $35,000 annually. Most employees under the FERS system contribute 0.8 percent of each paycheck to their pensions; CSRS employees now contribute 7 percent.

“No one is getting rich off of a government pension,” Colleen Kelley, president of the National Employees Treasury Union, said in a Monday conference call with reporters, which also included Rep. Gerry Connolly, D-Va. Connolly is a member of the House Oversight and Government Reform Committee and represents many federal workers. He said he expected a party-line vote on the measure, with Republicans voting for the bill and Democrats opposing it.

The bill, H.R. 3813, is similar to provisions affecting federal employees tucked into the House-passed payroll tax cut extension legislation. H.R. 3813 also would require members of Congress to contribute a total of 1.5 percent more to their pensions for three years beginning in 2013. In addition, federal employees hired after Dec. 31, 2012, and newly elected lawmakers would contribute 4 percent to their defined retirement benefits; special occupational groups, including law enforcement employees hired after that date, would contribute 4.5 percent to their pensions.

The measure places those new hires under a high-five average salary calculation for annuities rather than the current high-three average pay calculation. The current FERS-defined benefit pension is calculated by taking the retiree's three highest salaries and dividing it by years of service and a variable pension accrual rate. Existing CSRS and FERS employees still would operate under the high-three calculation under H.R. 3813.

“As Congress looks for ways to cut costs, pension reform that ensures a positive return to the worker while delivering cost savings to the taxpayer should be job one,” said Rep. Dennis Ross, R-Fla., who introduced the bill and is chairman of the House Oversight and Government Reform federal workforce subcommittee. CSRS has an unfunded liability of more than $600 billion, while FERS is out of the red. In the same statement, Ross acknowledged that lawmakers “receive better pension benefits than the rest of the federal workforce and better than most citizens in the private sector.”

Federal employees nearing retirement are especially concerned over a provision that would eliminate the FERS minimum supplement for individuals not subject to mandatory retirement beginning in 2013. Individuals subject to mandatory retirement include certain categories of employees such as law enforcement, firefighters, air traffic controllers and nuclear materials couriers. Under current law, the FERS minimum supplement is paid to these employees and to federal employees who retire before age 62. The FERS minimum supplement represents the amount employees would have received from Social Security if they were 62 years old on the day they retired, and is paid until they reach age 62 and begin receiving Social Security checks.

John Kelshaw, who works for the Internal Revenue Service in New Jersey, said the FERS Social Security Supplement was a major factor in his decision to move from CSRS to FERS. Kelshaw, who is nearing 30 years of federal service, joined the government in the early 1980s. He originally was covered under CSRS but switched over to FERS. “A promise made should be a promise kept,” he said of the FERS minimum supplement benefit to retirees.

“Federal employees have planned for and relied on this benefit being available to them for decades,” Kelley said. “It is hard to imagine that this Congress would blatantly break this promise when so many are just about to become eligible for this benefit.”

The Federal Managers Association also decried Ross’ bill. “This legislation disproportionately places an inequitable burden on federal employees under the false pretense that their pay and benefits are far greater than their private sector counterparts',” FMA President Patricia Niehaus wrote in a Feb. 6 letter to lawmakers. “In reality, most federal employees are middle-class citizens struggling financially during these tough economic times, just like other Americans.

Kelley said NTEU would not consider palatable any changes to federal pensions that would require government workers to take on more cost. She said the two-year pay freeze has saved $60 billion, while several other proposals calling for reductions in federal workers’ compensation would amount to billions more from a group that has contributed enough in the name of deficit reduction. “It is totally unjustified to try to put such a disproportionate burden on one group while continuing to shield the wealthiest from any contribution at all,” she said.

During a Monday event at the nonprofit Partnership for Public Service, longtime government management observer Paul C. Light said federal employees likely will have to pay more for their pensions at some point. “I think it will happen,” he said of proposed changes to federal retirement benefits. “Symbolically, it’s a done deal.” In other words, the politics on the issue are not in federal employees’ favor. Light is a professor at New York University’s Wagner Graduate School of Public Service and founding principal investigator of the Global Center for Public Service.

H.R. 3813 is one of several legislative proposals under consideration that could affect federal workers. Other bills on the table would extend the current federal pay freeze, eliminate within-grade step increases for feds through 2012 and shrink the size of the government workforce through attrition.