House bill would extend pay freeze

House Republicans on Friday unveiled a payroll tax cut extension bill that includes an additional pay freeze for federal employees and lawmakers and increases the amount both groups contribute to their pensions.

The legislation extends the current two-year federal pay freeze through 2013 for federal workers and also applies to members of Congress.

In addition, the amount that federal employees and lawmakers contribute to their retirement pensions would increase beginning in 2013. Most employees in the Federal Employee Retirement System -- the majority the government workforce -- would see their pension contribution rate increase from 0.8 percent to 2.3 percent over three years, starting in 2013. For other special occupational groups and members of Congress, the increase would be a total of 1.5 percent -- from 1.3 percent to 2.8 percent during the same period.

The pension contribution rates for employees covered by the Civil Service Retirement System would increase from the current level of 7 percent to 8.5 percent over three years, starting in 2013. The employee contribution for special occupational groups and lawmakers also would go up by a total of 1.5 percent of salary over three years, beginning in 2013.

The legislation also changes the retirement structure for new federal employees hired after 2012, with less than five years of credible service for retirement purposes. That group would contribute 4 percent to their pensions, a rise of 3.2 percent from the current 0.8 percent level. The employee contribution for special occupational groups and lawmakers would increase by a total of 3.2 percent, from 1.3 percent to 4.5 percent.

Additionally, the measure subjects new hires to a high-five average salary calculation for annuities rather than the current high-three average pay calculation. Existing CSRS and FERS employees still would operate under the high-three calculation.

The package also eliminates 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 payments. House Republicans estimate that the extended pay freeze and the changes in the federal retirement system will save $62 billion. A vote on the bill is expected next week.

Republicans stressed that the payroll tax extender plan is a balanced package that is offset by necessary spending cuts and includes provisions providing tax relief to many Americans and businesses while protecting Social Security. The legislation also aims to create more jobs by expediting a decision on the Keystone XL energy pipeline, requiring the permit to be granted within 60 days of the bill's enactment unless President Obama determines the project is not in the nation's interest.

Federal employee unions criticized the proposals affecting federal pay and benefits to finance the payroll tax holiday. Colleen Kelley, president of the National Treasury Employees Union, called the legislation "the most anti-worker bill yet to come out of this Congress."

The International Federation of Professional and Technical Engineers vowed to work on alternative ways to fund the payroll tax cut extension. Matt Biggs, IFPTE's legislative and political director, called the Republican proposal "just another example of the GOP not allowing an opportunity to take a swipe at federal employees pass them by."

John Gage, president of the American Federation of Government Employees, said the plan hurts people with vital government jobs. "This is a plan designed to raise taxes on the VA nursing assistants who care for wounded warriors, the Defense civilian employees who support our military troops at home and abroad, the Social Security claims representatives who process benefit payments to our nation's seniors and the many thousands of employees who protect our borders, skies, food supply and infrastructure."

Carl Goldman, executive director of the American Federation of State, County and Municipal Employees Council 26, said the bill shows House Republicans are carrying water for the wealthy.

"This is class warfare, plain and simple," Goldman said. "Instead of supporting the Senate Democrats efforts to impose a surtax on millionaires, they prefer to attack the pay and retirement of hard-working federal employees."

A two-year pay freeze on civilian employees, supported by many lawmakers and President Obama, took effect in January. The administration has estimated that the current two-year pay freeze will save $2 billion by the end of 2011, and more than $60 billion over the next decade. Obama also has called for an increase in the amount that federal workers contribute to their pensions as part of deficit reduction.

Senate Republicans proposed extending the payroll tax holiday by instituting a five-year pay freeze on feds and reducing the government workforce through attrition. That measure, however, failed overwhelmingly twice.

Senate Democrats released a payroll tax cut extension plan that did not include proposals reducing federal employees' pay or benefits. They would have paid for the measure in part by levying a surtax on millionaires and increasing the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayment of loans. That bill failed to garner the 60 votes needed to overcome a filibuster.

Many Democrats, including Obama, have not spoken out directly against proposals to pay for the tax cut via a longer freeze on federal salaries or a reduction of the government workforce. Some members who represent federal workers, including Rep. Chris Van Hollen, D-Md., and Sens. Ben Cardin and Barbara Mikulski of Maryland have voiced opposition to proposals that would affect federal pay and benefits. The White House in two statements said that it opposed the Senate GOP legislation, but did not specifically single out for criticism the proposed pay freeze or workforce downsizing recommendations.

Proposals to reduce federal employees' pay and benefits are not unexpected. Many lawmakers have introduced during this congressional session several pieces of stand-alone legislation that would downsize the federal workforce, extend the civilian pay freeze and increase employees' contributions to their pensions, among other recommendations.