Smaller Paychecks, Pensions In The Works?

Federal retirement benefits remain the most juicy low-hanging fruit as White House and Congressional negotiators look for quick ways to raise revenue and make major, long-term reductions in government outlays.

Bottom line: current employees could wind up paying slightly more for their retirement benefits, future feds could be required to pay a lot more and all retirees – federal, military and Social Security – could wind up getting reduced cost of living adjustments in the future. One proposal would permanently cut take-home pay, the other would permanently reduce COLAs for retirees.

The situation is so complex, and the issues so politically supercharged that even experts – rarely at a loss for words – are having a tough time keeping up. The balance of power and the current focus on activity seems to have shifted from ideological Democrats and Republicans, and the so-called Biden Group. All of them had ideas about ways to increase revenues and cut costs.

The bipartisan Biden group (headed by Vice President Joseph Biden) was the first to embrace higher retirement fees for federal workers. But insiders say the action now is between the White House, and House and Senate leaderships. The above-the fold headline in the Washington Post Friday said “OBAMA, BOEHNER PURSUE A DEAL AS DEMOCRATS FUME.” Boehner is the Republican Speaker of the House. And it would be safe to say that many of his Republican majority are as hot under the collar as the Democratic majority in the Senate.

While the situation seems to change-day-to-day, it appears there is tentative agreement between the White House and Congressional leaders to setup a two-tier system on retirement contributions. Under this plan, current employees under both the CSRS system and the FERS retirement program (which covers 80 percent of all current workers), would have to kick in more toward their retirement. The Biden group at one point was considering increasing FERS contributions by 5 percent, but one insider said he had heard (as reported here Thursday) that the employee contribution might be increased to 3.2 percent from the current 0.8 percent level. Under this scenario, contributions required of people hired in future under the FERS system would go up considerably more than current workers pay or would be required to pay.

The other likely target of budget-cutters are the cost of living adjustments that Social Security, federal retirees and military retirees get each January to keep pace with inflation. Retirees have had a COLA since 2009 when they got a 5.8 percent adjustment. They did not get raises last year or this year because of the low inflation rate as measured by the government. With several months left to go in the COLA countdown they are on track for – but not yet guaranteed – a raise of about 3.2 percent. But under one proposal being considered, the government would base future COLAs on the so-called chained CPI index. Backers of the change say it more accurately reflects true living costs. Critics say its merely a way to reduce all future COLAs.

The situation is fluid, fast-moving and because of propaganda efforts on all sides, the reporting is spotty at best. Still something has to happen sooner rather than later. And feds are very likely to take more than their share of the hits.

To reach me, mcausey@federalnewsradio.com

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