Feds’ Tension Over Possible Pension Changes Escalates

Federal employees will find out this week -- as soon as Tuesday -- whether budget negotiators plan to push for changes to their pension benefits as part of a deal to offset some of the sequester spending cuts.

The congressional budget conference committee led by Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., has until Dec. 13 to present its recommendations for rolling back the automatic spending cuts and extending the continuing resolution funding the government through Jan. 15, 2014. A “small” deal, rather than a grand bargain over tax and entitlement reforms, is expected; the panel is considering requiring federal employees to contribute 1.2 percent more to their pensions, which would save about $20 billion over 10 years, according to the White House and the Congressional Budget Office. The committee reportedly would use those savings to help pay for a partial repeal of the sequester.

But federal employee unions and other advocacy organizations, as well as the Washington-area congressional delegation, have pushed back hard on the proposal, arguing that federal workers already have contributed roughly $114 billion to deficit reduction efforts, mostly through the three-year pay freeze and changes to new federal hires’ pension benefits. A recent law requires feds hired after 2012 and those with fewer than five years of previous federal service to contribute 3.1 percent toward their pensions – 2.3 percentage points more than the 0.8 percent feds in the Federal Employees Retirement System put in per paycheck for their defined benefit plan. CBO has estimated that the changes to new hires’ pension contributions will save the government approximately $15.5 billion from 2012 through 2022.

The groups’ concerns are well-founded because Republicans and the Democratic White House have both proposed scaling back feds’ retirement benefits. Ryan, in his fiscal 2014 budget plan, wants feds to pay 5.5 percent more of their salaries toward their defined benefit; he would also eliminate an additional benefit -- what’s known as the FERS Annuity Supplement -- for those government workers who retire before the age of 62 and who are not eligible for mandatory retirement. President Obama in his fiscal 2014 budget blueprint recommended that federal employees contribute 1.2 percent more of their pay toward their pensions, phased in at 0.4 percent over the next three years. Obama also supports eliminating the FERS Annuity Supplement.

However, the Senate budget plan opposes further tinkering with federal employees’ pay and benefits. “Federal workers play a key role in running a smart and efficient government,” said the budget resolution, crafted by Murray. “These workers have borne the brunt of recent deficit reduction efforts, with years of pay freezes and many workers facing furloughs in the coming months caused by the indiscriminate and untargeted sequestration cuts.” The document noted that the Republican budget would “further harm these workers by significantly increasing their contributions to the Federal Employees Retirement System, effectively cutting their take-home pay in every paycheck.”

The plan the budget conference committee is reportedly considering would shift a disproportionate share of the short-term cost savings onto civilian government workers, advocacy groups argue.

“No other group of predominantly middle class Americans has contributed to deficit reduction the way federal workers have,” said Sen. Ben Cardin, D-Md., who represents a large federal employee constituency, in a Dec. 6 letter to Senate Majority Leader Harry Reid, D-Nev. “This relentless attack isn’t just devastating to workforce morale; it’s hurting our country and our economy.” Reid tapped Cardin to keep the Democratic Caucus apprised of matters concerning the federal workforce in the budget negotiations. Several lawmakers, including Rep. Chris Van Hollen, D-Md., ranking member of the House Budget Committee, and Minority Whip Steny Hoyer, D-Md., have publicly opposed increasing the amount feds contribute to their pensions as part of any budget deal.

Politico on Monday reported that the budget panel was discussing changes to the military’s retirement system as well to help save the government money.

A new analysis from the Congressional Research Service, requested by Cardin, summarized the savings associated with recent changes to federal employee pay and benefits.