Budget deal protects current feds, while new workers will pay more toward retirement

Washington Post economic columnist Neil Irwin tells you everything you need to know about the new budget deal — in two minutes. (Sarah Parnass/In Play/The Washington Post)
December 10, 2013

Federal employees hired after Jan. 1 will make higher contributions toward their retirement benefits than current workers under a budget deal announced Tuesday night.

Under the agreement reached by the Budget Conference Committee, the new workers would pay an additional 1.3 percent of salary toward retirement, saving the government $6 billion over 10 years.

While federal employee unions strongly pushed against any additional payments from the workforce, the agreement is a much better deal for them than what Republicans and even President Obama had proposed.

Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, wanted federal employees to pay an additional 5.5 percent toward retirement, or $130 billion over 10 years. Obama’s proposal was for a 1.2 percent increase for all federal employees, yielding $20 billion from workers.

“This has been a brawl over the last 48 hours,” said Rep. Chris Van Hollen (D-Md.), a member of the conference committee whose district is heavy with federal workers. “This agreement will not require additional contributions by any current federal employees.”

The agreement would create a three-tier system for employee contributions to their civil service pensions. Those hired before this year pay 0.8 percent of their salary, those hired in 2013 pay 3.1 percent and those hired after Jan. 1 would pay 4.4 percent under the budget agreement.

Colleen M. Kelley, president of the National Treasury Employees Union, said she was “disappointed that the budget deal announced today proposes increases to federal employee retirement contributions for new hires; however, I am glad to see the numbers were significantly reduced from original proposals and that these retirement increases will not impact current employees.

“Considering the $114 billion current federal workers have already contributed to deficit reduction, it was the right decision not to ask them to sacrifice again,” she said.

Van Hollen said Obama called from Air Force One, while traveling to South Africa for Nelson Mandela’s funeral, to assure the congressman that the administration would not advance additional pension contributions from federal employees in its next budget proposal.

The budget agreement also would lower the compensation level the government pays to some outside contractors.

The compensation level, determined by a statutory formula, is now set at $952,308 a year. The agreement, according to Van Hollen’s office, would bring it down to $487,000.

Van Hollen said non-defense agencies would have $22.5 billion more in fiscal 2014 than 2013, while the Pentagon will get $2 billion more.

“This should avoid furloughs in the coming year,” he said.

The agreement has some good and some bad, he added, but on balance “it’s a good step forward for the country.”

Joseph A. Beaudoin, president of the National Active and Retired Federal Employees Association, said: “This deal continues with the dangerous precedent set by Congress last year in taking from future federal employees to pay for bad policies and deficit reduction now. . . . This drain on our nation’s federal workforce must end. The federal government may never be the employer with the greatest pay and benefits, but it certainly shouldn’t be the employer of last resort either, and that’s where we are headed.”

Josh Hicks contributed to this report.

Joe Davidson writes the Federal Diary, a column about the federal workplace that celebrated its 80th birthday in November 2012.
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