Fed benefits spared in highway, student loan deal

Thursday - 6/28/2012, 10:47am EDT

This story was updated at 6:22 a.m. Monday, July 2.

Federal employees' retirement benefits are safe in a deal Congress passed Friday to fund federal highway projects for two more years and extend the student loan interest rate for another year.

The deal also allows retirement-eligible federal employees to opt for a partial retirement. These feds could work part-time and receive prorated pension payments. At least 20 percent of the partial retirees' time must consist of mentoring. The provision does not apply to postal employees.

Passage of the legislation spares 3,500 Department of Transportation employees from being furloughed and allows 136,000 highway projects currently underway to continue.

The Democratic-led Senate sent the measure to President Obama by a 74-19 vote, just minutes after the Republican-run House approved it 373-52. The President signed a one-week temporary measure Friday evening, permitting the highway and loan programs to continue until the full legislation reaches his desk.

Phased-retirement option draws bipartisan praise

The National Treasury Employees Union, one of the largest federal unions, praised the bill's inclusion of a phased retirement option.

"This is a workforce management tool that allows a great deal of flexibility," NTEU President Colleen Kelley, said in a release. "Under phased retirement, the employee continues to serve the agency and the public on a part-time basis and the agencies retain incredibly valuable knowledge and expertise."

The provision, which has bipartisan support, was first included in President Barack Obama's 2013 budget proposal. The Senate included it in its version of transportation funding and the House Oversight and Government Reform Committee also approved a version.

House Oversight chairman, Rep. Darrell Issa (R-Calif.), said called final passage of the bill, with the phased retirement option, a "win-win for the federal workforce and the American people."

"Phased retirement offers civil servants who have earned their full pension a third option instead of just full-time employment or immediate retirement," Issa said in a release. "Phased retirement allows federal employees to continue to contribute their talent and experience to their agency's mission and saves taxpayer dollars at the same time."

Vote came ahead of deadline

House and Senate conferees posted text of the conference report early Thursday. Congress passed the bill one day before the July 1 deadline, when funds would run out for surface transportation projects and when the student loan interest rate was set to double to 6.8 percent for new loans.

The bill will be paid for by changing how employers compute their pension liabilities and increasing premiums paid by employers for the insurance provided by the Pension Benefit Guaranty Corporation. The first proposal was an offset in the highway bill passed by the Senate.

The House and Senate had presented their own versions of a long-term highway bill. The Senate-passed version of the highway bill had included the partial retirement provision and a mass transit tax break, which was not included in the bill passed Friday.

A five-year bill introduced in the House included a provision to increase federal employees' pension contributions by 1.5 percent over the next three years. The bill also changed the pension formula from the highest three years' salary to the highest five years for employees hired after Dec. 31, 2012 who have less than five years of federal service.

Top Republican lawmakers had also suggested paying for the student loan rate extension by cutting federal employees' retirement benefits. In a May 31 letter to the White House, GOP leaders suggested increasing feds' pension contributions by 1.2 percent over the next three years.

Rep. John Mica (R-Fla.), the chairman of the House Transportation and Infrastructure Committee, said the conference deal will create jobs and contribute to the "shrinking of the federal bureaucracy."

"This legislation is specifically designed to reform and consolidate our transportation programs, streamline the bureaucratic project process and give states more flexibility to save taxpayers' hard-earned money, Mica said in a release.

Federal News Radio's Mike O'Connell and The Associated Press contributed to this story.

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