Severe Federal Worker Pay and Benefit Cuts Pass House and Senate

It’s not just talk, or the usual song and dance lawmakers put on about austerity in front of the cameras to make the folks in their congressional district’s believe they are doing their jobs in Washington.

It doesn’t look like a dog-and-pony show this time around: Congress seems genuinely determined to cut federal worker pay and benefits.

Last week, the Republican-controlled Senate passed a budget resolution that called for increasing federal worker pension contributions and ordered agencies to limit hiring new employees.

Also last week, the Republican-controlled House passed a budget resolution called for increasing federal worker pension contributions and ordered agencies to limit hiring in order to reduce the entire federal workforce by 10 percent.

To be clear, these budgets are not final and the White House has not publicly expressed any support for these measures. Congress and White House priorities will have to be sorted out before any budget resolution, or measure, becomes the new law of the land.

However, the notion that federal worker pay and benefits may radically change is transforming from mere political gamesmanship to actually becoming a probable outcome. Lawmakers and the White House are contending with short and long-term budget deficit spending — not to mention $18 trillion in national debt and the wrath of the public for letting our fiscal affairs spin out of control.

How we got there is not something we’re going to debate in this column. We are concerned with your pay and benefits — today and tomorrow — because that will determine your potential for retirement security.

Both proposals will no doubt cut deep into your paychecks. The Senate budget blueprint calls for federal workers to contribute 6.35 percent of their pay to the Federal Employees Retirement System (FERS) fund — where your basic retirement annuity comes from. According to Government Executive, that translates into a roughly 5-percent pay cut for most federal workers.

Currently, federal workers hired before 2013 contribute 0.8 percent of their pay to FERS. Workers hired in 2013 contribute 3.1 percent. Workers hired in 2014 contribute 4.4 percent of their pay.

The House budget actually calls for phasing out the FERS annuity supplement — one of your three federal retirement income streams, which also includes Social Security and any Thrift Savings Plan investments.

The Senate and House budget plans would also modify your federal-sponsored healthcare: in particular, the House “budget framework would … make changes to the Federal Employees Health Benefits Program, including tying the government’s share of premiums for retirees to inflation rather than the average cost of plans. It would additionally tie retirees’ health benefits to length of service,” according to Government Executive.

Here’s the deal: You must be mindful of how the sand may suddenly shift beneath your feet. You must begin planning for your retirement today in part because your retirement income is at the mercy of Congress and the White House.

If we observe what is happening on Capitol Hill, it is becoming quite clear that your pay and benefits may not be as safe as they used to be. Please contact one of our federal benefits specialists for a free consultation.

We’ll help guide you through these tough times.