The temporary increase in retirement contributions made by federal workers would be eliminated next year under legislation proposed by Sen. Paul S. Sarbanes (D-Md.).
Under a deficit-reduction package formula imposed by Congress and the White House several years ago, the contributions that workers make to the Civil Service Retirement System and the Federal Employees Retirement System were to increase gradually from 1999 to 2003.
Before the increase kicked in this year, workers under the CSRS plan contributed 7 percent of salary to their retirement plan each year. Those under FERS (who get a smaller civil service benefit when they retire) contributed 0.8 percent of salary. The contributions of both groups were to rise, in stages, by 0.5 percent.
This year, for example, employee contributions to the CSRS plan went up 0.25 percent of base pay. Under the deficit reduction plan, those contributions will increase an additional 0.15 percent next January and then rise an additional 0.10 percent in January 2001. When fully effective, that would boost contributions by a total of 0.5 percent, and that higher amount would remain in effect until January 2003. Similar increases have been made, or will be made, for FERS employees.
Sarbanes argues that with the budget surplus, the higher contributions aren't needed and that they amount to an unfair penalty on federal employees. His proposal is co-sponsored by Sens. John W. Warner (R-Va.), chairman of the Armed Services Committee, and Barbara A. Mikulski (D-Md.), Charles S. Robb (D-Va.) and Daniel K. Akaka (D-Hawaii). Warner can round up Republican votes. The presence of Milulski, Robb and Akaka is a signal to the Clinton administration that it's time for the pension increase to be ended.
If the proposal by Sarbanes is approved--either as a stand-alone bill or part of an appropriations package--contributions made by those under the CSRS plan would return to 7 percent next year, and FERS contributions would be rolled back to the 0.8 percent level.
Sarbanes argues that federal workers have taken enough hits. More than 300,000 federal jobs (including lots of promotion opportunities) have been eliminated by the Clinton administration. Feds have also been given a series of alternative "diet" pay raises, instead of higher amounts due them under the bipartisan 1990 federal pay law.
President Clinton has proposed a 4.4 percent federal pay raise next year. Both the House and Senate are working on a 4.8 percent pay raise for uniformed military personnel. Language in the House version of the Treasury, Postal Service General Government appropriations bill--inserted by Rep. Steny H. Hoyer (D-Md.)--would guarantee civilian federal workers the same January 2000 percentage pay raise as military personnel.
Although the amount of the pension contribution increase is relatively small, an early end to it would help federal workers who feel their take-home pay is dwindling.
Health insurance premiums are expected to go up an average of 10 percent next year. Although feds (and retirees) can switch to lower-cost plans during the next open season, many will stick with current plans even if premiums rise. The open season--when feds and retirees can change health insurance plans--will be in late November and early December. Those health plan changes will take effect in January.
Many are confused about the status of their January 2000 cost-of-living adjustment. That's because many politicians--and newspapers--incorrectly talk about cost-of-living adjustments for members of Congress and federal workers. The pay raises have nothing to do with the actual rise in the cost of living. They are linked to the employment cost index (which measures wage gains in the private sector), not the consumer price index, which measures inflation.
Federal and postal retirees and survivors are under a system designed to keep pace with inflation--not wage changes. Based on the CPI (the inflation yardstick), retirees are due a true COLA next year of about 1.8 percent. The final figure won't be known until living costs for the month of September are calculated.
Bottom line: Feds can expect raises of 4.4 percent to 4.8 percent. Congress next year will get a 3.4 percent adjustment. Neither is based on living costs. Federal retirees, and people getting Social Security benefits, stand to get a much smaller amount because inflation is low.
Life Insurance Options
The House Government Oversight civil service subcommittee is considering changes in the federal employees group life insurance plan. FEGLI is considered a good buy for older workers and those who are otherwise uninsurable. But for other feds and retirees--in good health--similar coverage can be purchased from private firms at less cost.
Mike Causey's e-mail address is email@example.com
Thursday, July 29, 1999