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New Simpson-Bowles plan could revive earlier proposals on fed worker benefits

The new Simpson-Bowles deficit reduction initiative put forward Tuesday as a potential route out of Washington’s budget thicket could revive several items in the original Simpson-Bowles plan that would have a significant impact on federal employee benefits.

The new document, from Erskine Bowles and former senator Alan Simpson, calls for “modernizing civilian and military health and retirement programs” and for “reforming cost-sharing” in health care. But it does not provide much detail.

The original report, issued in late 2010, similarly said that federal employee retirement benefits were out of line “with standard practices from the private sector” and recommended creating a task force to review potential changes. Those included basing benefits on the highest five consecutive salary years rather than the current three years; not paying inflation adjustments until age 62 and paying a onetime partial catch-up at that age; and requiring employees to pay into the retirement fund as much as the government pays, an increase of about 5 percentage points in the employee share.

The original also recommended a change in the cost-sharing arrangement in the Federal Employees Health Benefits Program that over time could shift more of the costs onto the enrollee. In the current system, the government pays about 70 percent of the total premium. Under the recommended voucher-type system, the government would pay a dollar amount that would rise annually, but likely by less than the average hike in premiums.

That was suggested as a test for possibly making a similar change in the Medicare premium formula.

The new document explicitly repeats the original plan’s call for switching to the “chained” Consumer Price Index to adjust various benefits for inflation. Under the original plan, federal retirement annuities would be among the affected programs. That index would produce adjustments about 0.3 percentage points a year less than what the current index yields, according to a Congressional Budget Office analysis of an earlier proposal.

American Federation of Government Employees Union president J. David Cox urged Congress to reject the new initiative. “It seems that Bowles and Simpson will not stop until federal employees lose almost half of their retirement benefits, until hundreds of thousands of federal employees are thrown out of work, and millions of Americans either never retire or are poorer and more insecure in retirement because the Social Security and Medicare benefits which they paid for, and on which they hoped to rely, are slashed,” he said in a statement Tuesday. Bowles and former senator Simpson were co-chairman of the president’s bipartisan National Commission on Fiscal Responsibility and Reform.

In a statement from the National Active and Retired Federal Employees Association,  president Joseph A. Beaudoin said: “It is just wrong to place so much burden on such a small group of hardworking Americans. To preserve the vital services they provide our country, we urge Congress to stop squeezing every last dime out of our federal workers before it damages the strength of our federal workforce.”

The original report also had recommended a three-year freeze on federal salary rates, which paved the way for enactment shortly afterward of a law denying general federal pay raises in 2011 and 2012. The freeze was later extended by a temporary budget measure that expires late next month. A 0.5 percent raise will be paid in April unless blocked; the House passed a bill last week to prevent that raise, but the measure’s prospects in the Senate are uncertain.