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Federal pension proposal may make public sector work less attractive, observers say

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A proposal to significantly increase payroll deductions of federal workers to contribute to the federal pension fund may make public service less attractive and possibly hasten an exodus among current workers eligible for retirement, some observers and workers said Monday.

The Washington Post reported Sunday that lawmakers and White House officials are considering the proposal as a way to help trim the budget.

“This just piles on to the demoralization that folks in the federal workplace feel,” said Dan Adcock, legislative director for National Active and Retired Federal Employee Association.

News of growing support for the plan — long endorsed by Republicans and President Obama’s bispartisan fiscal commission — follows a two-year pay freeze in place since January, a slowdown of hiring in many agencies and an increase in negative comments about the public workforce in Congress and on the airwaves.

John Palguta, vice president for policy for the Partnership for Public Service, said talk of targeting pensions, on top of everything else, threatens to make federal service less attractive both to the present workforce and to potential recruits.

“It’s kind of a package deal, and we’re seeing an assault on that,” he said.

Adcock said one result may be people leaving the public sector, including those eligible for retirement deciding to leave rather than linger.

“If people think the brain drain from the high number of federal employees who are eligible to retire is going to be bad, it’s going to be worse as more of these types of proposals receive serious consideration,” Adcock added.

Office of Personnel Management statistics suggest that as much as 60 percent of the federal workforce is eligible to retire in the next 10 years, he noted.

Observers have believed an anticipated retirement wave has been slowed by a weak economy.

Palguta said he is less concerned about a retirement exodus than a recruitment slowdown.

“It will not cause people to leave in droves,” he said. “I worry more about the impact of bringing in quality people.”

With the latest proposals clumped in, most federal employees may need to set aside about 17 percent of their earnings to pay Social Security and payroll taxes and contributions to the Thrift Savings Plan, according to Adcock.

“It’s going to be especially hard for those medium to lower-wage earners,” he said.

Presently, only $1 out of every $15 placed into the Federal Employment Retirement System, or FERS, comes from federal workers. About 80 percent of federal employees are under FERS. The plan pushed by Republicans would require civilian federal employees to pay 6 percent of their salary. As federal workers currently contribute only 0.8 percent, the change would amount to more than a 5 percent pay cut.

The idea has also been advocated by Obama’s bipartisan fiscal commission, which wants to adjust the ratio of employer/employee contributions to federal employee pension plans to equalize contributions.

The government contributes 12.7 percent of payroll to retirement accounts, significantly more than the average contribution of 5.3 percent made by private-sector companies for their employees. If federal employees split the contribution with the government, taxpayers would save $114 million over 10 years, according to the group Third Way, a centrist Democratic think tank.

Some longtime employees say cutting pensions would represent a betrayal for those who chose public service over higher salaries in the private sector.

“I think most people in public service do so knowing that this was part of the contract we signed on to when we came on,” said Tom May, a project manager with the U.S. Army Corps of Engineers at Elmendorf Air Force Base in Anchorage. “So making changes in midstream is quite unfair. I’ve heard people say the same thing, that we knowingly accepted the conditions that the position had, and we knew that the benefits and relative stability was one of the things we were buying into.”

Federal employees lunching and running errands around the Ronald Reagan Building in Washington on Monday said they were alarmed to hear the idea was advancing.

“It likely would affect all the people in my office,” said Environmental Protection Agency employee Carol Rivers, 59. “We didn’t get a raise, which does hurt a bit.”

“Immediately we’d feel an almost 5 percent pay cut,” said Geoffrey Benedict-Hall, a contractor with U.S. Customs and Border Protection whose wife works as a human resources manager for a government agency.

But Rep. James P. Moran (D-Va.), whose district is home to many federal workers, issued a statement Monday critical of the idea of using federal employee pensions to “stave off a government default. ... It puts our fragile economic recovery at risk and the retirement savings of the American people on the line.”

John Gage, president of the American Federation of Government Employees, the nation’s largest public union, said he was unhappy that the White House appeared to be supporting the plans. His union supported Obama’s 2008 presidential campaign.

“We’ve been expecting this and we’re going to fight it like hell,” he said, adding that his union members are planning to meet with lawmakers during their upcoming recess.

“We’re going to mobilize across the country and remind them that we aren’t a bunch of faceless bureaucrats, we’re VA nurses, Social Security workers, border patrol agents,” Gage said.

Read more reaction and share your thoughts on possible changes to the federal pension system at www.washingtonpost.com/federaleye

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