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Federal Eye
Posted at 02:50 PM ET, 04/25/2012

Fed workers would have to pay 5 percent of salary more toward retirement benefits

Federal employees would have to pay 5 percent of salary more toward their retirement benefits, phased in over five years starting in 2013, under legislation to be considered Thursday in the House committee that handles employee benefit issues.

Under the bill before the House Oversight and Government Reform Committee, current employees would pay 1.5 percent of salary more next year, an additional 0.5 percent in 2014 and yet another 1 percent each year over 2015-2017.

Those hired into the government in 2013 and later, and who had fewer than five years of prior federal service would start paying the entire 5 percentage point increase from the beginning of their employment.

“Like Social Security, the Civil Service Retirement and Disability Fund is not a store of wealth, it’s a line on the Treasury’s ledger,” committee Chairman Darrell Issa (R-Calif.) said in a statement. “If the federal government’s out of control spending is not curbed, these accounts will prove just how empty they really are — we need to secure these earned employee benefits and reduce the deficit at the same time.”

Under the proposal, members of Congress and their staff also would pay more toward their retirement benefits under either of the two main federal retirement systems, the Civil Service Retirement System and the Federal Employees Retirement System. The required contribution would increase by 8.5 percent of salary for members under either system, and by 8.5 percent of salary for staffers under CSRS and 7.5 percent for those under FERS.

Currently, employees under CSRS, which mainly covers those first hired before 1984, generally pay 7 percent of salary toward their civil service benefit, and those under FERS generally pay 0.8 percent toward a civil service benefit plus the standard Social Security contribution — typically 6.2 percent, but 4.2 percent in 2011 and 2012. Some employees, mainly in law enforcement, as well as members of Congress and their staff, pay slightly more and receive enhanced benefits in return.

The committee is taking up the measure under the House-passed budget resolution ordering the panel to find $79 billion in savings over 10 years in programs under its jurisdiction. No comparable legislation is expected in the Senate, which does not plan to enact a counterpart resolution. However, the idea of raising employee contributions by varying amounts has surfaced in numerous other bills.

The bill is virtually certain to draw opposition from employee organizations and some members of Congress who argue that federal employees already have contributed enough toward deficit reduction. Federal salary rates were frozen for 2011 and 2012 at 2010 levels, although certain forms of raises are still allowed.

Previously, an increase in contributions of 2.3 percentage points was ordered for those joining the government starting next year with fewer than five years of service. That increase would be included in the 5 percentage point increase in the committee bill.

In a letter sent to the committee Wednesday afternoon, the American Federation of Government Employees urged that the plan be rejected. AFGE said that raising the required contribution amounts to a tax increase that will cause many employees to reduce their savings in the 401(k)-style Thrift Savings Plan, in turn reducing the matching contributions the government pays for investors under FERS. “Employees will pay far more now and are virtually guaranteed to receive much less when they retire,” the letter said.

The bill also would eliminate, for most of those hired into government starting next year, a supplemental benefit under the FERS system for those who retire before age 62. That supplement duplicates the value of the Social Security benefit earned while under FERS until eligibility to draw Social Security begins. New employees who are subject to mandatory retirement before age 62, primarily law enforcement officers, would continue to be eligible for the supplement.

This post has been updated since it was first published.

By  |  02:50 PM ET, 04/25/2012

 
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