Federal employees are bracing for the possibility of paying more toward their retirement benefits as political leaders slowly renew budget discussions with an eye toward deficit reduction. House Republicans and President Obama have both proposed the change in order to achieve savings.
Democrats in both chambers of Congress have opposed the cuts, but Republicans are suggesting that they have leverage in the upcoming talks because of the automatic spending reductions known as sequestration, which are already in place through 2021.
The government-wide cuts, which started in March, are scheduled to grow larger in 2014. At that point, they will trim spending by $109 billion for the year compared to pre-sequester levels, whereas the 2013 reductions amounted to about $85 billion.
That gives Republicans somewhat of an advantage, since another breakdown in negotiations would still yield significant spending cuts — albeit hitting certain programs many GOP lawmakers would prefer to protect.
Democrats have insisted on eliminating the sequester in part by closing tax “loopholes” for corporations and the wealthy, but GOP leaders have said they would rather continue with the automatic cuts than allow new revenue through taxes. A conference committee made up of House and Senate lawmakers is supposed to work out the differences.
“If this conference is used as an excuse to raise taxes, then I fear we will not be successful,” House Budget Committee Chairman Paul Ryan (R-Wisc.) said last week. “We’ll take the spending cuts we have if that’s all it’s going to be.”
Republicans note that Congress and the White House already agreed to a tax hike this year that will bring in an estimated $600 billion over 10 years as part of the fiscal-cliff deal they reached early on New Years Day.
As for the future, Ryan has proposed a 2014 budget that would increase the contributions federal employees make toward their retirement plans by 5.5 percent of their salaries while eliminating special supplemental payments to certain federal employees who retire before age 62. The savings under that plan would be an estimated $132 billion over 10 years.
President Obama’s 2014 budget proposal calls for an increase in retirement contributions as well, but to a lesser extent. The plan would increase the federal-employee portion by 1.2 percentage points, saving the government an estimated $20 billion over a decade. It would also eliminate the supplemental retirement payments for future federal workers.
The Senate Budget Committee Chairman Patty Murray (D-Wash.) has pitched a plan that would leave federal-employee retirement contributions untouched while adjusting contractor compensation to achieve savings.
Labor groups say the proposed retirement changes are unfair in light of recent savings gained with cuts in federal-worker compensation. National Treasury Employees Union president Colleen M. Kelley noted that the government has already hit the workforce with sequester and shutdown furloughs this year, in addition to a 3-year pay freeze due to end in 2014 with a 1-percent raise authorized by the spending deal that funded operations through mid-January.
“The 16-day shutdown was, hopefully, the final act in the disparaging of federal employees,” Kelley said in a statement.
Below are a few key facts about federal-employee retirement benefits, compliments of a 2012 report from the nonpartisan Congressional Research Service.
This works on a three-tier system, with contributions depending upon when employees were hired. Those who started working for the federal government before 1984 take part in the Civil Service Retirement System, while those who began in 1984 or later enroll in the Federal Employee Retirement System.
* 7 percent of pay: That’s how much federal workers contribute toward their retirement plans if they take part in the Civil Service Retirement System. Those employees pay no Social Security taxes and earn no Social Security benefits.
* 0.8 percent of pay: That’s how much federal workers contribute if they take part in the Federal Employee Retirement System. They also devote 6.2 percent of wages up to $113,700 toward Social Security benefits.
* 3.1 percent of pay: That’s the amount workers contribute if the federal government hired them after the start of 2013. They also pay 6.2 percent of wages up to $113,700 toward Social Security benefits.
* 19 percent of pay: That’s how much the government contributes for employees hired before 1984.
* 11.9 percent of pay: That’s what the government contributes for workers hired between 1984 and 2012.
* $673 billion: That’s the combined size of the deficits for the Civil Service Retirement System and the Federal Employee Retirement System at the start of fiscal 2010. However, the funds are not in danger of becoming insolvent. The Office of Personnel Management has projected that the balances are growing and will ultimately reach about 20 times the amount of the annual benefit payments.
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