Over the past few months, MyFEDBenefits has covered proposed benefits cuts and changes to retirement options for employees. With the proposed 2018 budget, significant changes were on the table for federal employees and their potential income levels. Discussions about the types of benefits that employees should receive and the best plans for recruiting top talent lead to heated discussions in Congress as state representatives work to find a fair and economical balance for the budget.
Finally, in late October, these debates and proposals were resolved when the House and Senate both voted on changes to federal retirement benefits and passed a plan for current and future employees. For the most part, benefits of employees are still in place, thanks to several employee representatives who spoke out and Congressional representatives who listened.
How Did the Bill Pass?
On October 26, with a vote of 216-212, the House approved a plan by the Senate to save federal employee benefits. Opponents of the plan were predominantly Republican, with some GOP senators changing their vote to support federal retired workers and preserve their benefits into next year. Conservative lawmakers argued that these cuts could better balance the budget, while other representatives wanted to preserve the pension options of current employees.
In early October, experts predicted the House would enter a lengthy conference session to create a counter plan to the Senate’s bill, but instead lawmakers chose to adopt it instead, preventing potential benefits cuts and a heated debate over the futures of federal workers. This resulted in a sign of relief for both federal employees and the union representatives who speak for them.
One of the main goals of the House proposing its own bill was to reduce the federal deficit by $32 billion over 10 years through cuts to civil service pensions. This proposal was immensely unpopular with constituents who have worked several decades and prepared their pensions, only to see them on the cusp of getting cut. Members of both parties spoke out against this proposal, and Senate members eventually worked to create a bill that avoided federal pension cuts and preserved federal employee benefits, which the House quickly passed.
How Much Do Employees Stand to Save in This Bill?
After several months of strategic budget planning and bill drafting, members of Congress were able to preserve the majority of options for current, future, and retiring employees, but how much exactly was at stake?
FCW reports that the White House proposed federal retirement benefits cuts that totaled $6.5 billion starting in 2018. Alternatively, the House’s proposed cuts to pensions and retirement contributions would have totaled $163 billion over 10 years. While these cuts could have helped balance the federal budget and reduce the overall tax burden on Americans, experts believed it was unlikely that workers would see a significant financial benefit from the changes.
In fact, upon hearing that employees stood to lose up to $163 billion, The American Federation of Government Employees, took a strong stand against the proposal. These cuts would have impacted 700,000 employees and changed how they save for retirement — and even if they could afford to.
What Did the Proposed Benefits Cuts Include?
The team at MyFEDBenefits reported on the various proposed cuts to paid benefits extensively in order to help our customers better understand what was at stake. This round of proposed cuts was particularly challenging, because multiple parties shared their ideas for how the federal government should handle employment and reductions to the deficit. A few of these plans included:
- Asking employees to increase pension and 401(k) contribution rates to 4.4% while the government reduced its matching amount.
- Changing the pension calculations to a five-year average instead of a three-year average.
- Eliminating pension plans entirely while increasing the government’s contribution to Thrift Savings Plans.
The goals behind these changes ranged from making the federal government a more competitive employer (allowing it to recruit top talent) to reducing the overall federal deficit and using the resources other ways. The Congressional Budget Office went through these plans to determine their effectiveness and offer advice to which ones — if any — would have the desired effect on federal workers that Congressional representatives wanted.
January 2018 Is Still a Great Time to Review Your Benefits
While federal employees can breathe a sigh of relief that their federal benefits are no longer on the chopping block, this legislation serves as a reminder to all employees to check their retirement options and make sure they’re in a good place financially to retire.
If you’re unsure whether you’re ready to retire yet, check out our Free Benefits Workbook or speak with a Benefits Specialist who understands the nuances of your particular state and city. We can help you get on the right path toward retirement and weather just about any Congressional financial storm. Contact us today.