The fate of two key issues -- pay raises and retirement benefits for federal employes -- will be determined this week by the outcome of a Senate vs. White House policy battle.

Congress and the administration are trying to come up with a compromise budget package to reduce the deficit by $76 billion this year and in fiscal 1989.

Both sides agreed that $1.7 billion of those savings must come from cuts in pay and benefits for federal workers and retirees.

But the rub is over where to make those cuts. The administration wants to delay within-grade pay raises due 400,000 white-collar federal workers until October and to reduce lump-sum pension payments, which are available to civil servants when they retire, to half their current level.

The decision on how to cut the civil service program was supposed to be left to the Senate Governmental Affairs Committee.

The committee, working closely with its counterpart, the House Post Office and Civil Service Committee, proposed two alternative savings plans late last week.

But the White House, through Office of Management and Budget Director James C. Miller III, has balked at the Senate options, insisting that only its proposals, which amount to major policy changes, are acceptable for the budget package.

One of the Senate committee's two proposals would require the U.S. Postal Service to pick up the full cost of its employes' civil service retirement plan.

The Postal Service now pays just over half the cost of the pension program, with the rest of the money for benefits and cost-of-living adjustments coming from employe contributions to the plan or from the Treasury.

The second committee option would be to implement a complex gain-sharing plan proposed this year by OMB.

Under it, money that is saved by federal agencies through productivity and other cost-cutting measures would be returned to the government -- split between agencies and the Treasury.

But the White House is insisting that it won't count, or "score," either of those cuts for purposes of the budget agreement.

Instead it wants to freeze within-grade pay raises (worth about 3 percent) that are due white-collar civil servants between now and October.

Also, the White House wants to limit lump-sum pension payments that federal workers can request when they retire.

Currently retirees can get a check for an amount equal to all the money they contributed to the civil service pension plan while working.

The White House would limit them to receiving half that amount.

Postal and federal unions and retiree groups are putting heavy pressure on the Senate to stick with its budget-cutting options.

If they succeed, it is likely that Senate-House conferees will approve the package and present it on a take-it-or- leave-it basis to the president.

It appears that Congress and the administration have rejected earlier proposals to eliminate or delay a 2 percent white-collar federal pay raise due next month, as well as a proposal to trim the 4.2 percent cost-of-living adjustment due next month for federal, postal and military retirees and Social Security recipients.

The Senate Governmental Affairs Committee has until 8 p.m. tomorrow to present its budget-cutting options.