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Federal Eye
Posted at 03:09 PM ET, 05/10/2012

House backs higher federal worker pension contributions

The House on Thursday afternoon supported increasing the percentage of salary that federal employees must pay toward their retirement benefits. But the plan may advance no farther, at least not in its present form.


(Chip Somodevilla - Getty Images)

The 218-199 vote, with all voting Democrats in opposition along with 16 Republicans, came on a “reconciliation” bill designed to find savings to avoid automatic cuts in many programs beginning in January under terms of last year’s federal debt ceiling law.

The Senate is not scheduled to take up the bill, but concern has arisen there regarding the potential impact of the automatic cuts, particularly on defense programs.

Under the House-passed plan, federal employees would pay an additional 5 percent of salary toward their retirement annuities, beginning with a 1.5 percent increase starting in 2013. That would be followed by an increase of 0.5 percentage points in 2014 and an additional 1 percentage point in each of the three succeeding years.

Federal employee unions and several Democratic members of the House have argued that the plan unfairly singles out employee benefits for deficit reduction. Unions also are concerned that employees might have to cut back on their investments in the separate 401(k)-style Thrift Savings Plan.

Under current rules, 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 do not pay Social Security taxes or receive benefits from that system; instead, they pay 7 percent of salary toward their civil service benefit, which is worth roughly twice as much as a FERS civil service benefit.

Members of Congress, who already pay slightly more toward their retirement benefits, would see their required contributions rise by 8.5 percent of salary over the five years, under the bill.

Earlier this year a law was enacted to increase required retirement contributions by 2.3 percent of salary for those hired into the government after this year who have fewer than five years of prior federal service. Under the House bill, such employee would pay 5 percent more instead starting immediately on hiring, and they would further be ineligible for a supplemental benefit paid to FERS employees who retire voluntarily before age 62.

Several other proposals to increase required contributions also have been circulating this year, including a proposal by the White House for a 1.2 percentage point hike phased in over three years.

By  |  03:09 PM ET, 05/10/2012

 
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