CBO: Pension bill would save government billions

A bill that would increase the amount federal workers and lawmakers contribute to their pensions would reduce the deficit by $44 billion during the next decade, according to an estimate from the nonpartisan Congressional Budget Office.

The legislation, which the House Oversight and Government Reform Committee approved Feb. 7 on a party-line vote, would decrease mandatory spending by $2 billion over the next 10 years. That savings would come from the elimination of the Federal Employees Retirement System annuity supplement, a provision in the law that augments the retirement benefits of feds not subject to mandatory retirement who are covered under FERS and retire before age 62, or the age at which their Social Security benefits kick in.

CBO reported that the bill -- H.R. 3813 -- also would increase revenues by $42 billion over the next decade because the amount federal employees could contribute to their pensions would increase while agency contributions would not. “Reducing the employer contribution rates would lower spending subject to appropriation by $42 billion over the 2012-2022 period,” the estimate stated.

Federal employee advocates weighed in on CBO’s score for H.R. 3813. “There's no disputing that $42 billion is a lot of money,” said Julie Tagen, legislative director for the National Active and Retired Federal Employees Association. “Nobody understands its enormity more than our nation's middle-class workers who, if this proposal passes, will have to pay the government $42 billion out of their own paychecks over the next 10 years.”

Matt Biggs, legislative and political director of the International Federation of Professional and Technical Engineers, said a proposal by Sen. Bob Casey, D-Pa., would do more to reduce the deficit while protecting federal workers. “The Casey surtax bill will produce $76 billion in revenue and only impact 250,000 people, while this attack on federal workers will result in $44 billion and impact over 2 million middle-class workers,” Biggs said. Casey proposed levying a surtax on individuals who earn more than $1 million per year.

H.R. 3813, which the Republican leadership incorporated into the massive transportation bill heading to the floor next week, would require federal workers and members of Congress to contribute a total of 1.5 percent extra over three years beginning in 2013 to their defined retirement benefits. It also would eliminate the FERS annuity supplement, allow retiring feds to deposit lump sums from their unused annual leave into their Thrift Savings Plan accounts to boost their savings, and subject new hires to 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. CBO estimated the switch to the high-five calculation for those hired after Dec. 31, 2012, would yield modest savings of $274 million over the next decade.

The provision that would allow feds to transfer their unused annual leave to their TSP accounts would reduce revenues by $367 million from 2012 to 2022, CBO reported.

CBO also weighed in on the federal workforce’s attrition rates over the next decade. The estimated attrition rate for employees in the Civil Service Retirement System would increase from 17 percent in January 2013 to 22 percent by 2022; for FERS employees it would range from 5 percent to 13 percent over the same time frame.