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Federal pension changes would pay for extending payroll tax cut, unemployment benefits

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Federal employees may be forced to pay more for their pension plans as part of a package of bills intended to extend the payroll tax cut and unemployment benefits while paying down the federal deficit.

Congressional negotiators were considering a plan Wednesday that would generate about $15 billion to help pay for extending unemployment benefits by requiring current federal employees to pay .75 percent more of their salary towards their pension. The change would be phased in over three years in equal steps starting in fiscal 2013, according to congressional aides familiar with the plans. Newly hired employees would pay .75 percent of salary more from the start.

The aides cautioned that any final proposal could still change. Democratic lawmakers generally preferred the pension changes instead of extending the current two-year federal pay freeze, they said, because President Obama proposed a similar pension plan in his budget request.

Obama on Monday proposed making workers increase their contributions by 0.4 percent each year over three years to save about $27 billion in the next decade.

As they have with similar proposals, federal worker union leaders once again warned against changes to compensation.

“Cutting our retirements doesn’t put an American back to work, not one,” American Federation of Government Employees National President John Gage told reporters. “I really reject this schizophrenia that we lost revenue from jobs, and so we’ll cut the deficit more, which will cost us more jobs.”

Extending the payroll tax cut and unemployment benefits cannot “be done on the backs of other middle class federal workers who are struggling to get by just like everyone else,” National Federation of Federal Employees National President William R. Dougan warned on Wednesday.

“There is something seriously wrong in our country when Congress doesn’t blink an eye at dipping into the pockets of middle class VA nurses and border patrol agents, but threatens to shut down the government when asked to raise taxes for millionaires and billionaires,” Dougan added.

Full-time, non-seasonal federal employees on average earned about $76,600 annually in fiscal 2010, according to the most recent data compiled by the Office of Personnel Management.

In addition to the payroll tax cut extension, House lawmakers could vote soon on a separate bill requiring feds to pay still more toward their retirement, end a supplemental benefit that some receive during retirement, and craft a separate, less generous system for newly hired workers.

Staff writer Eric Yoder contributed to this report.

ed.okeefe@washingtonpost.com

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