Bill to cut federal retirement benefits saves $44B, CBO says

Monday - 2/13/2012, 9:08am EST

This story has been corrected to reflect the five-year calculation applies only to new hires.

An analysis by the Congressional Budget Office found a bill to cut federal employees' retirement benefits would save the government $44 billion over ten years.

The House bill — H.R.3813 — would require federal workers to contribute 1.5 percent more of their salaries toward retirement over three years and end a supplemental payment for early retirees under the Federal Employee Retirement System.

New hires would see their retirement contribution rates increase by 3.2 percent, and annuities for new employees hired in 2013 or later would be calculated based on the highest five-year average salary instead of the highest three-year average. The bill would also apply to lawmakers.

The House Oversight and Government Affairs Committee approved the bill last week.

Bill sponsor Rep. Dennis Ross (R-Fla.) said federal pensions need to be changed because they have an unfunded liability of $681.7 billion, calling the federal retirement benefits a "trust fund of IOUs."

Provisions of the bill also are tucked into a larger highway bill in the House.

CBO found H.R.3813 would cut the deficit by $42 billion and reduce direct discretionary spending by $2 billion from 2012 to 2022.

The analysis was based on the assumption that the current population of about 2.8 million feds will be maintained throughout the next decade. CBO estimated retirements would be replaced in equal number.

CBO said the rate of attrition for CSRS employees would increase from 17 percent in 2013 to 22 percent by 2022, and the attrition for FERS employees would range from 5 to 13 percent in that same period.

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