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Federal Eye
Posted at 12:40 PM ET, 06/01/2012

GOP: Raise retirement costs to pay for student loans

Congressional Republican leaders on Thursday suggested increasing the contributions that federal employees must pay toward their retirement benefits as a way of paying for keeping federally sponsored student loan rates from rising.

That was one of two options that the top GOP leaders of the House and Senate offered in a letter to President Obama for extending by one year the 3.4 percent rate for Stafford student loans.

The loan rate is set to double July 1, but a political standoff has arisen over how to pay for an extension. The letter called a Senate Democratic proposal to raise certain business taxes unacceptable to the Republican-controlled House. The House meanwhile has passed a bill to repeal part of the 2010 health insurance reform law and the White House has threatened a veto.

“We believe our alternative is reasonable and responsible, but in the interest of finding common ground on a way to pay for a one year extension of the current student loan interest rate we are open to other solutions that we have all supported in the past,” the GOP leadership letter said.

One of those proposals would raise the required federal employee contribution toward retirement benefits by 1.2 percent of salary over three years in equal portions starting in 2013. That increase was in the budget plan the White House proposed earlier this year.

Employees under the Federal Employees Retirement System pay 0.8 percent of salary toward their civil service retirement benefit, plus the Social Security payroll tax — typically 6.2 percent of salary, but 4.2 percent this year. Those under the Civil Service Retirement System, mainly covering those hired before 1984, pay 7 percent of salary toward their civil service benefit and do not earn a Social Security benefit.

The National Treasury Employees Union has urged the White House to reject the proposal to increase those contributions.

“While we have not always agreed with your budget proposals, you have consistently pushed for balanced proposals that require burdens to be broadly shared,” NTEU President Colleen M. Kelley wrote in a letter to Obama. “On the other hand, the House and Senate Republican leadership has sought to single out the federal workforce as virtually the only source of acceptable spending cuts and revenue increases.”

Earlier this year, an increase of 2.3 percentage points was enacted for employees who will be hired into the government in 2013 and afterward who have less than five years of prior federal service. That increase is designed to offset to an extension of unemployment benefits.

In addition, the House recently passed a plan to require all federal employees to pay 5 percent more of salary, phased in over five years starting in 2013. The Senate has not taken up that bill, which is aimed at preventing automatic spending cuts set for next year in many government programs.

The other option mentioned in the GOP letter to pay for extending the lower student loan rate was a package of changes in loan policies, Medicaid payment rates and scrutiny of Social Security payments.

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By  |  12:40 PM ET, 06/01/2012

 
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