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Federal Eye
Posted at 12:00 PM ET, 02/16/2012

Payroll tax deal forces new federal employees to pay more for retirement benefits

Newly hired federal employees would shell out more than 3 percent of their salaries to pay for retirement benefits starting next year as part of a deal struck early Thursday by congressional negotiators, according to aides familiar with the deal.


Sen. Max Baucus (D-Mont.) helped orchestrate the deal struck early Thursday. (Joshua Roberts - Bloomberg)

New federal employees hired after Dec. 31, 2012, who have less than five years of federal service would pay 2.3 percent more than current employees enrolled in the Federal Employees Retirement System. Current federal employees — and any current employee with more than five years of service who is hired into a new federal position — would not be affected, the aides said. The changes would generate about $15 billion in savings to help pay for an extension of unemployment benefits. Newly elected members of Congress also would be subject to the increased pension contributions, aides said.

As with all deals struck by congressional negotiators in the wee small hours of the morning, details of the plan could change as the day progresses. Further details were expected by late Thursday afternoon, aides said.

Negotiators originally were set on a plan that would have required all federal employees to increase retirement contributions, but Sen. Benjamin L. Cardin (D-Md.), a key Senate negotiator, objected, and got both sides to agree to the changes, aides said.

Despite the breakthrough, federal worker union leaders warned Thursday that the proposal would establish two classes of federal employees — new hires — and mostly younger federal employees — paying more for retirement benefits, and current employees — many of whom are older — paying less for the same benefits.

A multi-tiered retirement system “is a disturbing precedent,” said National Federation of Federal Employees President William Dougan. “We are all public servants. We all make sacrifices to serve our country. Congress must not forget that.”

Forcing new hires to pay more for their benefits might also deter job applicants from seeking federal jobs, Dougan said.

“Federal government jobs are still considered good jobs,” he added. “If we go down this path of taking away key benefits from future federal employees, that will no longer be true. The days of federal agencies hoping to attract the best and brightest will be over.”

John Gage, president of the largest federal union, the American Federation of Government Employees, once again turned to a broader economic argument — that making one group of workers pay for the hardship of other workers is unfair.

“Cutting take-home pay for working class men and women is exactly the wrong thing to do to put Americans back to work,” he said.

Follow Ed O’Keefe on Twitter: @edatpost

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For more, visit PostPolitics and The Fed Page.

This post has been updated since it was first published.

By and  |  12:00 PM ET, 02/16/2012

Categories:  Congress, Workplace Issues

 
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