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Shows & Panels
Obama dumping chained CPI, which feds, employee groups strongly opposed
Thursday - 2/20/2014, 2:46pm EST
Unlike his 2014 budget proposal, the President's new budget will not contain a proposal to calculate cost-of-living increases for federal retirees and Social Security recipients using a "chained Consumer Price Index." The chained CPI is based on the idea that as prices on household goods and services increase, people opt for lower-cost items. This was expected to reduce annual COLA increases by 0.3 percentage points each year.
Joseph A. Beaudoin, president of the National Active and Retired Federal Employees Association (NARFE), praised the President for dropping the chained CPI from the 2015 budget.
"This flawed proposal should be taken off the table once and for all, and it is heartening to see the President has changed course on the Chained CPI," Beaudoin said, in a statement. "Our nation's seniors, veterans and federal retirees should never be pawns in the budget game."
As recent as last week, more than 100 Democrats in the House and members of federal-employee groups added their names to a letter Rep. Allyson Schwartz (D- Pa.) sent to Obama, asking him not to include the chained CPI in this year's budget proposal.
"Switching to a chained CPI would be devastating for seniors, veterans, federal retirees, disabled individuals and others," Schwartz's letter stated.
The median annual benefit under the Civil Service Retirement System (the retirement system for employees hired before the mid-1980s), is about $31,400, according to the Office of Personnel Management.
Under the chained CPI, though, benefits would grow more slowly with inflation. Over five years, CSRS retirees would lose out on about $1,500, according to an online calculator created by the National Active and Retired Federal Employees (NARFE) Association. After 15 years, that would shoot up to more than $14,788 in reduced benefits.
NARFE, the American Federation of Government Employees and the Military Officers Association of America also signed on in support of the letter.
"For seniors who rely on the average Social Security benefit of $15,000 a year, the chained CPI would cost them $23,000," said Elaine Hughes, NARFE's national secretary, during a rally on Capitol Hill last October. "The chained CPI would, on average, rob retired military members of $42,000."
At the same rally, Phil Odom, a retired Air Force colonel and the deputy director for government relations for MOAA, called the chained CPI "an insidious radical change" that was in reality a budget cut.
"Retired veterans who are disabled as a result of service to our nation would be severely impacted by the chained CPI," he said. "It would clobber military retirees and veterans as well by reducing the retired pay earned by arduous service by members who do retire, their VA disability pay acquired by wounds and injury in combat and their Social Security annuity. So in our estimation, it's a triple whammy on the military."
Rep. Chris Van Hollen (D-Md.) told AFGE members earlier this month that he had a promise from President Barack Obama that the White House would not propose any federal retirement changes in its fiscal 2015 budget.
Today's announcement seemed to confirm that promise, but it still remained uncertain whether the recent increase to employees' pensions would be part of the 2015 budget proposal as well.
In last year's budget deal, Congress mandated that some federal employees would be contributing more to their pensions beginning this year. Federal workers hired beginning this year would be required to contribute 1.3 percent more toward their retirements compared to workers hired last year and 3.5 percent more compared to employees on board before the start of 2013.
AFGE National President J. David Cox has said repealing those retirement changes is among the union's top priorities this year.
"Congress has created a second-class and third-class retirement system in which new federal employees earn less than their peers for no other reason than the date they were hired," Cox said in a statement.