The budget President Reagan sends Congress on Monday will propose a 1984 pension freeze for the government's 3 million federal and military retirees, in addition to a pay freeze this year for civil servants and active duty military personnel.
Reagan's budget would allow government and military retirees--including 100,000 in this area--to get the cost-of-living adjustment (COLA) that goes into effect in April.
That COLA, based on the rise in living costs last year, will show up in checks mailed for delivery in May. Retirees who are 62 and older will receive a 3.9 percent raise while younger retirees will get a 3.3 percent COLA.
If Congress goes along with the proposal to freeze pensions through 1984, it would mean that the upcoming May COLA would be the last inflation catch-up for retirees until June of 1985.
Under the plan, which will be formally presented to Congress on Monday, government retirees would not get any COLA increases during 1984. The raise they would get in mid-1985 would reflect the rise in living costs for 1984. That COLA would not include any catch-up for any increase in inflation that occurs this year.
The COLA deferral for federal and military retirees is harsher than the president's proposal for Social Security recipients. His budget will propose that the raise due them in July 1983 be delayed until January 1984.
The budget will also propose major changes in the federal retirement program that would require present workers to stay longer, and contribute more money into the civil service fund.
Under the plan, employes would have to work until age 65 to get full benefit of whatever annuity they earned based on their average high-salary and length of service. Currently, employes can retire at age 55 with 30 years service without any reduction in annuity.
The proposal the president will make in his budget would make a 5 percent reduction in annuity for each year that an employe is under age 65 at the time of retirement. Administration officials say that employes who are already 55 with 30 years service could still retire without penalty.
In addition, beginning next year it would require employes to pay 9 percent of their salary into the civil service fund. Beginning in 1985, they would have to pay 11 percent of salary into the fund.
Currently, employes contribute 7 percent of their gross salary into the CS retirement fund. Their agencies match that contribution. In addition, the government makes regular payments to the CS fund. The Office of Personnel Management says the actual cost to the government of the retirement program exceeds 30 percent of salary.
The president has also endorsed the concept of putting new federal and postal employes under Social Security. Federal employes now pay only the Medicare tax portion of Social Security. That is 1.3 percent of salary on amounts up to $35,700.
If Congress agrees to put new federal workers under Social Security, it might also modify the civil service retirement plan for them to make it a supplementary system to Social Security. Otherwise, new federal workers would apparently have to pay the full Social Security tax (6.7 percent of salary on amounts up to $35,700) in addition to full civil service retirement contributions.
Democratic leaders in the House have said they want Social Security reforms--which include mandatory coverage for federal workers--taken up early in this session of Congress.
Government union leaders think they can defeat mandatory Social Security for new workers, but only if it can be separated from the overall Social Security reform package and voted on separately.