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Trump’s budget calls for hits on federal employee retirement programs

President Trump addresses the graduating class of the U.S. Coast Guard Academy during commencement ceremonies on May 17. (Kevin Lamarque/Reuters)

The budget proposal President Trump plans to unveil Tuesday would give to federal employees with one hand, while taking away with five others.

It calls for a 1.9 percent pay raise in January for civilian workers and a 2.1 percent hike for the military.

But in real terms, the civilian increase would be less than it looks if proposed hits on retirement benefits are adopted. Trump’s fiscal 2018 budget would:

  • Increase Federal Employee Retirement System (FERS) contributions from workers by 1 percentage point each year until they equal the government’s contribution. This would take five to six years and would result in increased out-of-pocket payments of about 6 percent over that period. Out-of-pocket payments by federal law enforcement officers would increase by the same amount, but would not equal the greater contributions from law enforcement agencies.
  • Base future retirement benefits on the average of the high five years of salary instead of the current high three
  • Eliminate cost of living adjustments (COLA) for current and future FERS employees
  • Cut the COLA for Civil Service Retirement System (CSRS) employees by 0.5 percent from what the formula would allowed
  • Eliminate supplement payments for FERS employees who retire beginning in 2018. The supplement approximates the value of Social Security benefits for those who retire before age 62.
The Trump administration is expected to introduce its 2018 budget proposal on May 23, which will likely include major cuts to programs for low-income Americans. (Video: Jenny Starrs/The Washington Post, Photo: Jabin Botsford/The Washington Post)

FERS, which covers employees first hired after 1986, and CSRS have different requirements. Those covered by CSRS, for example, do not receive Social Security benefits.

Senior Office of Management and Budget officials, who declined to be identified because the budget has not been released, said that the increase in retirement contributions would not apply under CSRS because the employer and employee shares under that system already are equal.

Similarly, they said that eliminating the FERS retirement inflation adjustment while only reducing it for those retired under CSRS takes into account that FERS retirees receive Social Security, which is fully inflation-adjusted, as part of their benefits.

The retirement changes supposedly would take effect with the fiscal year that begins in October. Since the federal budget rarely is finished by that deadline, any measure including them likely would set a different effective date.

Most of these proposals have been in the Republican playbook for years. With that party now in control of the White House and Congress, chances increase that some or all of them will become law, even as the probability is low that Trump’s entire budget will be enacted as proposed.

The thought of Trump’s assault on federal retirement programs becoming law enrages federal employee leaders.

National Active and Retired Federal Employees Association President Richard Thissen called Trump’s plan “beyond insulting. It is downright mean. Simultaneously promoting tax cuts and forcing a tax on just federal employees, through an increase in retirement contributions, is the height of hypocrisy.”

The OMB officials emphasized that it is not only federal retirement that would face sacrifice under the spending plan.

“We’re all in the soup together,” said one, as they noted other shared “hard choices” in the budget.

But the soup is deeper and has been brewing longer for federal employees.

A preliminary budget document released in March called for a domestic discretionary budget decrease of $54 billion, with an equal increase for defense, homeland security and veterans. Nineteen 19 small agencies would be eliminated, along with their workforces.

Beyond the budget’s retirement hits, reducing the number of federal employees would result from other budget cuts, a March executive order on reorganizing government and OMB’s plan for reforming government and reducing the federal workforce issued in April.

Going back to the Obama administration, feds have been “singled out,” said National Treasury Employees Union President Tony Reardon. They have “contributed more than $20 billion to deficit reduction through increased retirement contributions, and more than $182 billion overall from combined retirement, pay cuts, and unpaid furlough days in the past few years,” he added.

Administration officials pointed out that there would be no hits on federal employee health insurance or the Thrift Savings Plan and argue retirement benefits would remain relatively good under the Trump proposal.

“We’re still going to be very generous. There’s still going to be a big gap” compared to the private sector, said one OMB official, noting a recent Congressional Budget Office report. It said on average “the cost of benefits was 47 percent higher for federal civilian employees than for private-sector employees.” It attributed much of that difference to better retirement benefits for feds.

Federal employee leaders, however, are not buying that “very generous” line.

“This is an outrageous attack on middle class workers,” Reardon said. “NTEU strongly objects to further attempts to increase employee retirement contributions, which are effectively a substantial pay cut.”

Basing retirement on the “high-five” instead of the “high-three” means “federal employees are rightfully going to be livid about these proposed pension cuts,” added Randy Erwin, president of the National Federation of Federal Employees.

Increasing the FERS employee contribution would result in the average federal employee losing nearly $5,000 per year in take home pay, that’s per year after the phase-in is finished, he estimated. “Phasing this outrageous pension cut in over several years does not make it any more palatable. If this change is made, federal employees will no longer have a secure retirement. Period.”

Staff writer Eric Yoder contributed to this report.

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