In pension calculations, proposed ‘high five’ is really a slap in the face
By Joe Davidson,
In many ways, President Obama is right when he calls the folks on Capitol Hill a “do-nothing Congress.” But you can’t say that about House Republicans who have marched to a steady beat in pressing legislation that would make life more difficult for federal employees.
The next step in that march will be taken Tuesday afternoon when the House Oversight and Government Reform Committee considers, and probably approves with a party-line vote, the Securing Annuities for Federal Employees Act.
Don’t be confused by the name of the bill. It certainly does not make federal employees feel more secure about their annuities.
In the first bullet of a news release about his legislation, Rep. Dennis A. Ross (R-Fla.) says it would calculate federal retirement on an employee’s highest five earning years instead of the highest three, as is currently done. That would apply to workers hired after this year and who do not have at least five years of previous federal service. Members of Congress would be included.
Other provisions would increase contributions by employees to their pensions by 1.5 percent over three years (“an immediate decrease in the take-home pay of two million hard-working Americans,” says the Federal Managers Association) and decrease the multiplier used in annuity calculations, resulting in many federal employees paying more for smaller retirement programs.
“Like many proposals currently floating around the Hill, this legislation is a cynical attempt to force federal workers to continue to shoulder the load of paying for other congressional priorities, including paying down the debt, while sparing our highest-wage earners from sacrificing at all,” Gregory J. Junemann, president of the International Federation of Professional & Technical Engineers, said in a letter to Congress.
Not so, says Ross.
“The American people are also, rightfully, outraged by the pension benefits guaranteed to a bloated federal workforce, paid for through an ever increasing tax burden on the American worker,” he said in the release.
Moving from the high three to the high five would take thousands of dollars from an individual’s retirement income, compared with the way the system works today.
The Congressional Budget Office provided this estimate of just how big the hole would be over five years in a 2009 report: “The resulting initial pensions would be about 3 percent smaller for most new civilian retirees, saving the federal government $1.2 billion over five years. The average new CSRS [Civil Service Retirement System] retiree would receive $1,424 less in 2010 and $7,148 less over five years than under current law. The average new FERS [Federal Employees Retirement System] retiree would receive $462 less in 2010 and $2,322 less over five years.”
Of course, those figures would only multiply over the years of a worker’s retirement.
And remember, federal employees already are doing their part through the current two-year freeze on basic federal pay that is saving the government $60 billion over 10 years.
Although employees on the payroll now would not be hit by moving to a high-five system, they remain in danger of getting their retirement pockets picked by Ross’s legislation and another bill approved by the full House in December.
Those measures seek to eliminate the FERS supplement for most workers who retire after this year. This would save the government an estimated $1.6 billion to $1.8 billion over 10 years — which is to say, that’s the amount federal workers would lose.
This retirement supplement is paid when FERS-covered employees retire before age 62. It duplicates the Social Security benefit they earned during their years of federal employment and is paid until they can begin drawing Social Security at 62.
The proposed legislation would leave the benefit in place for employees who are subject to mandatory retirement before 62, primarily law enforcement officers, firefighters and air traffic controllers.
If the supplement is eliminated, at least a couple of federal workers say they will feel cheated by a government reneging on its retirement agreement.
Sharyn Phillips, an IRS estate and gift tax attorney in New York City, said she counted on having the supplement after her planned retirement in 2016 with 30 years of service. Her husband, a retired federal worker, is in poor health.
“Affordable retirement, assisted by the FERS supplement, would enable me to spend as much quality time with him as possible,” she said during a news briefing organized by the National Treasury Employees Union. “Without the FERS supplement, however, affordable retirement as I long envisioned it — and as it has become increasingly important to me because of my husband’s health circumstances — simply would be out of reach.”
As John Kelshaw, an IRS employee in Kenilworth, N. J., put it: “A promise made should be a promise kept, particularly when people base life decisions on it.”
Staff writer Eric Yoder contributed to this column.