Federal Pensions Could Be At Risk -- Again

A provision that would require federal employees to contribute more to their pensions could end up as part of a House Republican plan to raise the debt ceiling, according to several news reports.

The House GOP leadership had been expected to unveil a bill on Thursday that would increase the current $16.7 trillion debt limit through 2014 in exchange for delaying the health care reform law for one year and implementing several other deficit reduction and economic growth proposals Republicans favor. Lawmakers reportedly are considering changing the federal retirement system by requiring employees to contribute more to their pensions to help pay for the debt ceiling increase.

It’s not clear how much more House lawmakers would ask federal workers to put toward their retirement benefits, if such a provision is included in the legislation. Right now, most enrollees in the Federal Employees Retirement System contribute 0.8 percent of their pay to their pensions, with the government picking up 11.9 percent, for an overall 12.7 percent contribution. FERS employees also contribute 6.2 percent of their pay to Social Security as well as a percentage to their Thrift Savings Plan, the government’s 401(k)-style defined contribution program. FERS employees not subject to mandatory retirement who retire before age 62 -- or the age at which their Social Security benefits kick in – receive an additional benefit, known as the FERS Annuity Supplement.

For the last few years, several lawmakers, outside observers such as the bipartisan Simpson-Bowles deficit reduction panel and the Obama administration have recommended that federal employees pay more for their pensions to help save the government money. Proposals have ranged from an extra 1.2 percent to a 5 percent increase, phased in over time. Congress passed a 2012 law that requires feds hired after 2012 or with fewer than five years of previous federal service, to contribute 3.1 percent toward their defined benefit plan -- 2.3 percentage points more than what most current feds put in.

Federal employee unions have urged President Obama and Congress not to use federal pay and benefits as a bargaining chip in budget debates. “After three years of frozen pay, unpaid furloughs, huge increases in retirement costs for new employees, and the threat of massive layoffs at the Defense Department and elsewhere, Congress and the administration need to keep their hands off of federal employees once and for all,” said J. David Cox Sr., national president of the American Federation of Government Employees, in a statement. Cox said in an interview that he has exhorted administration officials not to barter with employees’ pay or benefits, and that he expects the president and the union’s “friends in the Senate” to “hold the ground” against any efforts to reduce employees’ pay and benefits to broker a larger budget deal.

As of Thursday evening, it was unclear when the House would finalize and  vote on debt ceiling legislation. The Republican plan also would simplify the tax code, approve the Keystone XL oil pipeline and push regulatory reform.

Uncle Sam will exhaust its emergency borrowing authority by Oct. 17 and won’t have enough money to pay all of its bills if Congress does not increase the debt limit, Treasury Secretary Jacob Lew said on Wednesday. The nonpartisan Congressional Budget Office projected on Wednesday that the government would run out of its emergency borrowing authority and its cash balance of $30 billion between Oct. 22 and the end of the month. If Congress does not increase the debt ceiling and the government exhausts its extraordinary measures, runs out of cash on hand and does not receive enough daily revenue to pay its bills, then it will default on its obligations.

The debate over the debt ceiling and funding the government past Sept. 30 has been complicated by recent Republican efforts in the House and Senate to tie those budget battles to their quest to starve Obamacare of money. The latest plan, which could affect the federal retirement system, would shift the debate to the debt ceiling and decrease the threat of an imminent government shutdown.

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