The Reagan administration -- perhaps as early as this week -- will propose sweeping changes in federal retirement that would hit everybody working for Uncle Sam as well as the nearly 3 million retired civil servants and military personnel.
The president spent part of the weekend studying recommendations of a special task force that would, if adopted:
* Raise the retirement age in government from age 55 to 62.
* Peg cost-of-living raises for retired civil servants, postal workers, military personnel and their survivors to either the Consumer Price Index (which measures the rate of inflation) or the Wage Index (which measures pay increases in the private sector), whichever is lower.
* Limit civil service annuities to 80 percent of the actual salary of the GS (general schedule) grade the person retired from.
* Adopt a complex recomputation formula that could freeze COL raises for hundreds of thousands of retirees, or give them reduced COL raises for the next several years.
The first item is self-explanatory. If the administration proposes it, and if Congress buys it, federal workers would have to wait until they are 62 to retire and become eligible for an immediate pension. Employes with enough service can now retire as early as 55.
The second proposal, which may also include Social Security benefits, would link annual retiree COL raises to the Consumer Price Index or the Wage Index, whichever is the lowest. In recent years the CPI has gone up higher than the Wage Index.
Item number three could put a temporary cap on the annuities of about 100,000 federal retirees whose monthly payments are now higher than the salaries they earned when they retired. That is because COL benefits have, in many cases, gone up faster than federal pay. The proposal, if adopted, would limit U.S. retiree annuities to no more than 80 percent of the current salary of the grade they retired from.
There are a couple of variations for the fourth proposal, neither of them very pleasant for hundreds of thousands of retirees. One proposal would be to go back to the early and mid-1970s when retiree annuities were linked to the COL with a 1 percent sweetener feature. In those days federal pension increases were triggered when the COL rose 3 percent over the amount of the last increase, and remained at the higher level for 3 consecutive months.
Because of the time lag in getting the raises to retirees, Congress voted to give them a 1 percent sweetener, or add-on, to the actual COL raise. So if the COL for that period rose 6.8 percent, retirees eventually got a 7.8 percent raise. Congress repealed that law in 1976 and substituted a system whereby retirees got raises every six months (March and September) based on the actual COL increase. Congress repealed that law last year. Now retirees get COL raises every 12 months.
Office of Personnel Management officials believe that many people who retired during the 1 percent sweetner period were, in a sense, "overpaid." COL percentage raises -- tied to inflation -- frequently outstrip federal pay raises -- tied to politics and budgets -- of federal workers. The plan would recompute the pension "overpayment" during that period. The recomputation would focus either on the extra amount provided by the 1 percent sweetener, or on the amount by which retiree raises exceed percentage hikes of active duty feds.
Whichever method is chosen, if either is, it would show many retirees "owe" the government and that overpayment would be collected by denying them all or part of future COL raises until the so-called overpayment is satisfied. That is heavy, unpleasant reading for a Monday morning. But the proposals are being given serious consideration. Some of them may surface this week when the president outlines his plan to cut cost of entitlement programs, like food stamps, Social Security, federal and military retirement costs.