New bill aims to cancel sequestration for DoD at cost to feds' pay and benefits

Tuesday - 12/3/2013, 4:32pm EST

A new bill would cancel sequestration entirely for the Defense Department and a handful of other security-related agencies in fiscal 2014 and 2015 by requiring federal employees to contribute more of their salary toward their pensions, trimming Medicare payments and agricultural subsidies and making other reforms to entitlement programs.

The "Provide for the Common Defense Act," introduced by Reps. Jim Bridenstine (R-Okla.) and Doug Lamborn (R-Colo.) Tuesday, seeks to cancel sequestration for the "revised security category," according to a statement on Bridenstine's website.

"The bill would reduce the deficit by $200 billion over ten years by reforming entitlements as requested by the President in his 2014 budget and unwinding for two years the devastation to national defense caused by sequestration," the statement said.

Discretionary spending limits for the revised security category, which mainly includes DoD as well as the National Nuclear Security Administration, would rise to $552 billion in fiscal 2014 and $566 billion in fiscal 2015.

The Budget Control Act originally divided sequestration cuts evenly between Defense and nondefense spending. However, last year Congress made some one-time changes to the law, including changing the spending categories to security and nonsecurity, in a bid to boost Defense spending.

To offset these changes, the bill proposes using reforms to entitlement programs proposed by President Barack Obama in his 2014 budget.

These include changes that directly impact the federal workforce:

  • Using a chained Consumer Price Index (CPI) to calculate cost-of-living adjustments (COLAs) to federal retirement programs;

  • Eliminating the Federal Employee Retirement System Annuity Supplement for new employees;

  • Increasing how much federal employees contribute to the Federal Employee Retirement System from 0.8 percent to 2.0 percent of their pay over a three-year period. This is broken down at a 0.4 percent increase over each of the three years. Federal employees in the Civil Service Retirement System would see the same 0.4 percent increase to their annual contribution of 7 percent. At the end of three years, they would be paying in 8.2 percent annually.

When President Obama released his budget last April, his proposal to use a chained CPI to calculate COLAs generated a degree of opposition among supporters of the federal workforce.

"Don't be fooled by economists and politicians who claim that switching to the chained CPI formula for Social Security benefits, retirement annuities and disability insurance is 'painless,'" said Joseph Beaudoin, president of the National Active and Retired Federal Employees (NARFE) Association at the time.

For example, the median annual benefit under the Civil Service Retirement System (CSRS) is about $31,440, according to OPM statistics. Under the chained CPI, retirees would miss out on about $1,500 after five years due to reduced benefits, according to NARFE's calculator. After 15 years, that would balloon to more than $14,788 in reduced benefits.

"While the short-term reduction in benefits may be modest, the long-term reduction will be substantial," Beaudoin wrote in a December 2012 letter to lawmakers. "In 30 years, when many current beneficiaries will still be alive, retirement income from these sources will be 9.2 percent lower."

Earlier this year, NARFE launched an online calculator, so federal employees could calculate how much they would lose in retirement annuities under a chained CPI.

"President Obama could not have picked a worse or more regressive item in the House Republican budget than the chained CPI," said AFGE National President J. David Cox Sr. in a statement.

In a letter to the chairman and ranking members of the House-Senate budget committee, Rep. Frank Wolf (R-Va.) expressed dismay that several bills under consideration to end sequestration do so at the expense of the federal workforce.

"The sacrifice must be shared," he said. "I cannot ... support a budget agreement that asks the federal workforce to once again disproportionately feel the brunt of Washington's failure to share the pain."

Other changes proposed in the Bridenstine/Lamborn bill include increasing the Medicare Part B deductible by $100 over a five-year period; increasing premiums related to income under Medicare Part B and D; and capping or cutting some agriculture subsidies.

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