Federal Retirement MyFEDBenefits

There has been a lot of talk about federal retirement benefits lately. After months of debate and partisan fighting over benefits cuts, both sides passed a plan to protect federal benefits and avoid significant cuts to current and retired employees last November. Congress had finally reached an agreement for the 2018 proposed budget, and everyone employed by the government was able to relax knowing they would have savings and retirement contribution options for another year.

Now, the White House has released its FY 2019 Budget Proposal. It looks familiar. Some of the top priorities for this administration over the coming year include hiring freezes for civilian employees and changes to the federal retirement benefits system.

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While the budget will still undergo extensive debate and review by members of Congress, the continual insistence on cuts to federal employees has some people worried. The majority of employee benefits were saved at the eleventh hour last year, but can they survive this year?

What Does the FY19 Budget Mean for Federal Retirement Planning?

While the budget covers spending across all agencies and expenses, the parts of the plan that concern federal employees the most relate to pay, benefits, and healthcare coverage. These impact their take-home pay, retirement timeline, and (in some cases) future employment with the federal government.

A few highlights from the FY19 budget include:

  • Civilian employees typically receive a 2% pay increase annually. However, this budget freezes federal pay increases. While civilian employees may see an increase on a local level, there will not be a COLA from the federal government. Members of the military will receive a 2.6% raise.
  • The administration is encouraging agencies to adopt “pay-for-performance” increases. Instead of automatically increasing pay annually, therefore promoting longevity, the White House wants the federal government to reward people based on the work they do.
  • The budget will also increase the employee portion of FERS retirement contributions to 50%. The goal is to better align federal government jobs with private sector counterparts. Federal employees are paid 17% more on average, largely due to benefits, not salary. The current administration wants to reduce costs to the government by making pay rates even.
  • Finally, the FY19 budget would reduce the government’s contribution to the Federal Employees Health Benefits (FEHB) program and encourage employees to invest in high-performing plans for greater impact.
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The end goal of all of these initiatives is to reduce costs to the government. By aligning with the private sector and reducing the types of pay raises employees can receive, operating the government costs less.

However, in many instances, employees end up paying more out of their own pockets to save for retirement and invest in health insurance. These increases, along with a lack of pay raise, give federal employees less overall buying power and could affect the private sector and overall American economy.    

How Did Lawmakers React to the FY19 Budget?

Federal retirement benefits experts and advocates have reviewed the budget and offered their opinions based on the information. Most employee advocates are unimpressed, and some are downright hostile to the plan.

“If we don’t stop the pay freeze for 2019, [federal employees] will have given up $246 billion in wages and benefits since 2011,” J. David Cox, national president of the American Federation of Government Employees (AFGE), said. “No other group has lost more to deficit reduction than the federal workforce.”

Richard Thissen, president of the National Active and Retired Federal Employees Association (NARFE) agrees. “Denying a modest pay raise during a time of economic prosperity demonstrates disdain for federal workers and needlessly punishes middle-class households,” he said.

Both organizations say they plan to work to maintain employee benefits and fight for pay increases for federal civilian workers. Through lobbying Congress and seeking discussions with the current administration, they hope to change the current budget plan.

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Set Yourself Up Financially to Survive Any Budget Cuts

The FY19 proposal has real impacts for federal employees, even if it hasn’t been passed yet. For multiple years in a row, federal retirement benefits have been considered for cuts, meaning employees will have to take steps to increase their contributions.

If all of these proposals pass, then most federal workers will need to figure out the best way to balance their budget to save more, invest in healthcare, and meet the country’s rising cost of living with the same pay they make today.

This can be intimidating for anyone. Now is the time to review your finances and make sure you’re covered for any future changes.

MyFEDBenefits offers free consultations to employees to help them get the most out of their benefits. Find a professional in your state and set up a call to discuss your concerns. You may have benefit options that you’re not taking advantage of to the fullest.

You don’t have to be a financial expert to plan for uncertainty in the future. We can help, regardless of the budget or administration. Contact us today. 


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