Analysis: Obama's debt reduction proposals to spur retirements

Tuesday - 9/20/2011, 10:47am EDT

John Palguta, vice president for policy, Partnership for Public Service

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By Jolie Lee
Federal News Radio

The White House proposal for federal employees to contribute an extra 1.2 percent toward retirement may not hurt government's efforts to recruit, but it could increase the number of retirement-eligible employees who leave government.

"If you want to have fewer employees, this is a good thing. If you want to hold onto some of your best employees a little bit longer, this is not the best thing," said John Palguta, the vice president for policy at the Partnership for Public Service, in an interview with the Federal Drive with Tom Temin and Amy Morris.

The President said on Monday that reforms to the federal employee benefit systems will add up to $42.5 billion in savings in the next decade. Savings would also come from changes to military retiree benefit programs and a cap on some contractor executive salaries. President Obama submitted his proposals to the deficit reduction commission on Monday.

The proposed increase in the retirement contribution will have little impact on recruitment because new employees, particularly entry-level employees, look at the overall salary and benefits — not just retirement, Palguta said.

However, the number of retirees have been on the rise and could go up with the new measures. In fiscal year 2010, 51,196 federal employees retired, according to the Office of Personnel Management website. Palguta said more than 31,000 have retired in the first half of fiscal year 2011.

"We're on track to have 60,000 leave in this fiscal year," Palguta said.

While the President's proposals are among a host of others that impact federal employees' pay and benefits, retirement-eligible feds should remind themselves that the recommendations are still only proposals.

"We don't have any indication that Congress is inclined to enact the President's as is, quickly," Palguta said. "A lot may change yet."