Federal Retirement Fairness Act

A new bill, The Federal Retirement Fairness Act, is working its way through the congressional process as elected officials look to help employees who were temporary contract workers before they were hired full-time.

Temporary workers don’t receive the same federal retirement benefits as full-time employees, and a few years of contract work can set federal workers back several years when planning for retirement. The Bill aims to fix this issue. 

What Is The Federal Retirement Fairness Act?

The Federal Retirement Fairness Act (H.R. 5389) allows federal employees who could not pay into retirement benefits to retroactively pay contributions and receive benefits services.

Congressman Derek Kilmer (D-WA) introduced the bill after talking to federal employees at Puget Sound Naval Shipyard. These workers wanted to retire, but couldn’t for another several years because they were hired as temporary employees and then brought on to permanent positions. Several of their coworkers who started several years after they were able to retire sooner because they were hired to full-time positions from the start.

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The Face of Delayed Retirement

The Kitsap Sun profiled one employee in particular, Allen Hodge, who is 54 and plans to retire in 2020 at the age of 57. Hodge said he is ready to step down, and it is time for a changing of the guard. He worked five years as a temporary employee (with breaks and furloughs in between) and will hit a total of 30 years of service in 2020.

Hodge thought he was ready to retire, then he started reviewing his benefits and service history. It was then that he discovered that those five years did not count toward his 30 years of service, and he would have to push back his retirement several years to catch up.

Hodge isn’t alone. There are currently 13,700 employees working at the shipyard, and roughly 950 shipyard employees would be eligible to receive annuities with the help of this new bill. The Sun reports that more than 2,300 shipyard employees will be eligible to receive retirement benefits in the next five years.    

The Puget Sound Naval Shipyard is just one example of a federal agency with a significant number of employees who want to retire. Thousands of federal employees are ready to retire, but can’t because of the existing rules on contract work. Not only does this force older employees to keep working through what should be their Golden Years, it also prevents job vacancies for younger employees to step in and fill. Both older and younger generations are affected by the rule.

Congress is debating the Federal Retirement Fairness Act, which would allow federal employees who could not pay into retirement benefits to retroactively pay contributions and receive benefits services.Click To Tweet

Federal Employees Will Foot the Early Retirement Bill

So far, The Federal Retirement Fairness Act is a bipartisan bill with both a Democrat and Republican sponsor (Walter Jones – R-NC). Both congressmen are clear that these benefits come at a cost.

As part of the plan, employees who want to take advantage of the “buy back” program need to pay 1.3% of their base salaries (plus interest) and the part the federal government would have contributed during their time working in temporary positions. This is one of the main reasons the bill is gaining traction: the employees themselves are responsible for putting in the money while the government approves their retirement and adjusts the length of time they have worked in a federal capacity.

Despite the increased costs, many retirement experts believe the plan will still benefit federal employees who want to retire early. This bill should also help with recruitment, as Americans may be less likely to apply for temporary or contract positions with the hope of working full-time if it means they won’t be able to save for retirement. More people are likely to apply if they know they can catch up to their full-time counterparts.   

This bill also comes at a time when federal agencies and congressional leaders are looking to cut back on spending. In some cases, positions of retired workers won’t be filled again, allowing agencies to have a reduction in force (RIF) without having to lay off workers. Younger workers who step in to fill open positions will likely be offered less, reducing salary expenses across the federal government.

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Learn How This Bill Affects Your Retirement Plan

The Federal Retirement Fairness Act highlights just how important it is to start planning for retirement years before you actually plan to leave federal service. Hundreds of employees are in Allen Hodge’s shoes. They want to retire and think they are financially ready, but learn that they still have several years before they have a chance to leave and receive the benefits they earned. Other employees think they have enough saved, but aren’t sure how long the money will last.

Whether it’s your first day in a federal position or your last few weeks, we can help you navigate the federal retirement process. Our comprehensive benefits workbook and team of local specialists will help you organize your benefits and improve your financial situation for a long, happy retirement.

Don’t wait until you clock out for the last time to think about retirement. Contact us today and set yourself up for success.


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