What the Budget Deal Means for Federal Employees

Furloughed government union workers demonstrate on the side of Constitution Avenue October 2, 2013 in Washington, DC.
National Journal
Kellie Lunney, Government Executive
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Kellie Lunney, Government Executive
Dec. 11, 2013, 5:11 a.m.

New fed­er­al em­ploy­ees and mil­it­ary re­tir­ees would have to con­trib­ute more to their pen­sions un­der the bi­par­tis­an deal the con­gres­sion­al budget con­fer­ence com­mit­tee un­veiled Tues­day even­ing.

Fed­er­al work­ers hired on or after Jan. 1, 2014, with less than five years of ser­vice would have to pay 4.4 per­cent to­ward their defined re­tire­ment be­ne­fit — 1.3 per­cent more than the cur­rent 3.1 per­cent that em­ploy­ees hired after 2012 con­trib­ute.

Mil­it­ary re­tir­ees un­der the age of 62 would see a de­crease, phased-in over the next two years, to the cal­cu­la­tion of their cost-of-liv­ing ad­just­ment, equal to in­fla­tion minus 1 per­cent. “This change would be gradu­ally phased in, with no change for the cur­rent year, a 0.25 per­cent de­crease in Decem­ber 2014, and a 0.5 per­cent de­crease in Decem­ber 2015,” ac­cord­ing to a sum­mary of the deal. The change would not af­fect ser­vice mem­bers who re­tired be­cause of in­jury or dis­ab­il­ity.

The pro­pos­al also caps the amount the gov­ern­ment can re­im­burse con­tract­ors for ex­ec­ut­ive com­pens­a­tion at $487,000. The cur­rent cap is more than $900,000.

The deal re­quires new ci­vil­ian fed­er­al work­ers and mil­it­ary re­tir­ees to con­trib­ute $12 bil­lion in sav­ings over­all — $6 bil­lion from each group — to help par­tially re­peal the se­quester for fisc­al 2014 and fisc­al 2015. That $12 bil­lion fig­ure is part of the total pro­posed $63 bil­lion in sav­ings to off­set the auto­mat­ic spend­ing cuts for two years.

Cur­rent fed­er­al em­ploy­ees man­aged to emerge un­scathed. Ini­tial re­ports of the deal said cur­rent fed­er­al work­ers would have to con­trib­ute $20 bil­lion over­all to the budget sav­ings, prompt­ing fed­er­al em­ploy­ee uni­ons and oth­er ad­vocacy or­gan­iz­a­tions, as well as the Wash­ing­ton-area con­gres­sion­al del­eg­a­tion, to push back hard against such a pro­pos­al.

“One of the most dif­fi­cult chal­lenges we faced as we worked through this, was the is­sue of fed­er­al em­ploy­ees and mil­it­ary,” said Sen. Patty Mur­ray, D-Wash., dur­ing a press con­fer­ence with Rep. Paul Ry­an, R-Wis., on Tues­day. The two led the budget con­fer­ence ne­go­ti­ations. “And Con­gress­man Ry­an and I have worked on this a lot,” she ad­ded. “He is a tough ne­go­ti­at­or”¦and it star­ted out very high at $20 bil­lion; it is now down to $6 bil­lion for fed­er­al em­ploy­ees, and $6 bil­lion for mil­it­ary.”

Rep. Chris Van Hol­len, D-Md., rank­ing mem­ber of the House Budget Com­mit­tee and a mem­ber of the con­fer­ence com­mit­tee, re­portedly played a ma­jor role in re­du­cing the amount fed­er­al work­ers had to sac­ri­fice. Van Hol­len has a large fed­er­al em­ploy­ee con­stitu­ency.

Work­ers in the Fed­er­al Em­ploy­ees Re­tire­ment Sys­tem hired in or be­fore 2012 con­trib­ute 0.8 per­cent to their defined re­tire­ment be­ne­fit, or pen­sion; those in the Civil Ser­vice Re­tire­ment Sys­tem now con­trib­ute 7 per­cent. A 2011 law re­quires feds hired after 2012 and those with few­er than five years of pre­vi­ous fed­er­al ser­vice to con­trib­ute 3.1 per­cent to­ward their pen­sions. CBO has es­tim­ated that the change to post-2012 hires’ pen­sion con­tri­bu­tions will save the gov­ern­ment ap­prox­im­ately $15.5 bil­lion from 2012 through 2022; those sav­ings are sep­ar­ate from the sav­ings un­veiled by Ry­an and Mur­ray on Tues­day.

If Con­gress ap­proves the budget deal, then fed­er­al work­ers will have con­trib­uted roughly $120 bil­lion to de­fi­cit re­duc­tion, which in­cludes the three-year pay freeze.

Ry­an said it was “only fair” to tax­pay­ers who help sub­sid­ize fed­er­al em­ploy­ees’ pen­sions to ask feds to con­trib­ute more. “So, what we are ask­ing here, is that the people who work for the fed­er­al gov­ern­ment — and we thank them for their work, they are hard­work­ing ded­ic­ated people that we re­spect — but we think it’s only right and fair that they pay something more to­ward their pen­sions just like the hard­work­ing tax­pay­er that pays for those pen­sions in the first place,” said Ry­an.

The $85 bil­lion sav­ings pack­age an­nounced by Mur­ray and Ry­an would fund the gov­ern­ment past Jan. 15, 2014, avert­ing an­oth­er shut­down and set­ting spend­ing levels for the next two years.

“If Chair­man Ry­an and I did not reach an agree­ment, we would be at se­quester level very shortly, and many of these same people [fed­er­al em­ploy­ees] would be fa­cing fur­loughs, lay­offs and un­cer­tainty,” Mur­ray said. “We have brought cer­tainty back to all those people.”

The deal’s fu­ture re­mains un­cer­tain in Con­gress, es­pe­cially giv­en many Demo­crats’ op­pos­i­tion to in­creas­ing the amount fed­er­al work­ers pay to­ward their pen­sions as well as the aver­sion from Re­pub­lic­an and Demo­crat­ic law­makers to tinker­ing with the mil­it­ary re­tire­ment sys­tem.

“This agree­ment isn’t per­fect, but it is cer­tainly bet­ter than no agree­ment at all,” Van Hol­len said in a state­ment. “This dif­fi­cult ne­go­ti­ation has gone through many phases. The fi­nal product re­places part of the job-killing se­quester without dis­pro­por­tion­ally hit­ting work­ing fam­il­ies, in­clud­ing hun­dreds of thou­sands of pub­lic ser­vants.”

Na­tion­al Treas­ury Em­ploy­ees Uni­on Pres­id­ent Colleen Kel­ley offered tempered praise for the deal.

“While we think fed­er­al em­ploy­ees con­tin­ue to con­trib­ute a dis­pro­por­tion­ate amount to de­fi­cit re­duc­tion and should not be in­cluded in this pack­age, there is re­cog­ni­tion in this deal that cur­rent fed­er­al em­ploy­ees already sac­ri­ficed again and again,” she said in a state­ment. “I am dis­ap­poin­ted that the budget deal an­nounced today pro­poses in­creases to fed­er­al em­ploy­ee re­tire­ment con­tri­bu­tions for new hires; however, I am glad to see the num­bers were sig­ni­fic­antly re­duced from ori­gin­al pro­pos­als and that these re­tire­ment in­creases will not im­pact cur­rent em­ploy­ees.”

More from Gov­ern­ment Ex­ec­ut­ive, our sis­ter site:

De­fense Com­bat Pay, Bo­nus Au­thor­ity At Risk

Pro­gress­ive Dems to Obama: Raise Min­im­um Wage for Fed­er­al Con­tract­ors

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