Pensions/Premiums: Endangered Species?

As Congress and the White House look for ways to dramatically reduce the costs of government, many feds have focused on the possibility of an extended pay freeze and a potentially minor change in the way pension benefits are calculated.

While both are important they are, to some extent, distractions from some of the more immediate and serious threats to lifetime benefits that are being considered. Examples:

• Congress may vote to extend, by one to three years, the two year federal pay freeze imposed by the White House. Serious to be sure, but better than taking a pay cut, which has happened in the private sector, or being laid off as is happening in the U.S. Postal Service.
• The idea of calculating federal retirement benefits on the employee’s highest 5 years of service (instead of the current high-3 formula) has been around for years. But Congress has never acted on it and has not been formally proposed this year.

The clear and present danger for feds comes from the bipartisan group headed by Vice President Joe Biden. It has been tasked with coming up with savings that congressional Republicans and Democrats will okay. The group has set a July 1 deadline to come up with a package for Congress. At the top of that list may be a proposal that would force 80 percent of the federal workforce (everyone under the FERS retirement plan) to increase their retirement contributions from 0.8 percent to 5.8 percent. Although their gross salary would remain the same, that would amount to a cut of 5 percent in take-home pay.

Also under consideration are proposals to require federal and postal workers to pay a larger chunk of their health care premiums. Currently, federal workers pay about 30 percent of the total premium with their agency taking care of the rest. Employees at the Postal Service, FDIC and a handful of smaller agencies pay even less. But under one money-saving plan being considered, the percentage of the premium workers pay would increase each year until workers and retirees were paying nearly half the total premium.

Finally, politicians are looking at a plan that would drastically reduce future costs of federal, military and Social Security retirement costs. Benefit increases for the retirees are now based on the rise in inflation as measured by the Consumer Price Index. But under the new plan a different yardstick would be used to measure inflation. Some experts say it would produce future cost of living adjustments that are one percentage point less each year than under the current CPI-linked formula.

Bottom line: There is plenty to worry about and – unless you are contributing to a union or a professional group representing workers, managers, executive or retirees – there isn’t much you can do about it. But if you must worry and want to keep score, focus on the closest and most serious threats.

To reach me: mcausey@federalnewsradio.com

Nearly Useless Factoid
by Suzanne Kubota

Before their adoption by the U.S., the bumps and ridges, called “reeded edges,” around the outside of coins were used in the U.K., according to MentalFloss. “When the physicist Isaac Newton became warden of the Royal Mint in 1696, he used reeded edges, among other means, to combat clippers and counterfeiters.”

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