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Federal Eye
Posted at 12:25 PM ET, 09/19/2011

Obama calls for raising employee contributions to retirement plans

Davidson

President Obama called Monday for raising the employee contribution to federal worker retirement plans to help pay for his job creation package.

Under the plan announced Monday morning, the employee contribution would increase by 1.2 percentage points over three years beginning in 2013, generating $21 billion in savings over 10 years, the White House said.

That’s half of the $42.5 billion in savings that Obama is seeking by making changes to benefit programs for civilian employees and military personnel.

The American Federation of Government Employees quickly called the Obama plan unfair. For an employee with an annual salary of $47,500, AFGE said, the plan amounts to a $570 annual pay cut.

“Asking federal employees to accept additional cuts to their take-home pay is unfair, especially at a time when citizens are demanding more services from their government,” said AFGE President John Gage. “This is a double whammy for federal employees, who are facing the same economic hardships as most other Americans. Enough is enough.”

Federal employees already are under a two-year pay freeze, which was imposed in January.

Obama also called for capping payments to individual contractors at the annual pay level of the senior-most federal civil servants, which is now $200,000.

“Setting the cap at this level would result in estimated savings of at least $300 million annually, and would bring greater parity between federal and contractor executives’ compensation,” the White House said.

Administration officials said they don’t expect the measure to charge employees more for retirement benefits would make it harder for the government to attract talent.

Obama also called for a commission on federal public service reform, which could lead to significant changes in the nation’s Civil Service system.

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