Pay and Benefits Watch: Payroll deductions under siege

Two years ago, as Congress and the Clinton Administration debated how to save money and pass a Balanced Budget Act, federal employees were staring down the throat of a $12 billion cut to their benefits.

Retiree cost-of-living adjustments were going to be delayed several months, the government was going to reduce its share of health care premiums, the retirement formula was going to be changed from hi-3 to hi-5 and retirement contributions were going to be increased 2.5 percent.

Federal employee-friendly lobbyists and lawmakers managed to knock down most of the proposals. The only proposal that survived the Balanced Budget Act battle was the plan to increase retirement contributions, but the increase was knocked down from 2.5 percent to just .5 percent.

Under the 1997 balanced budget agreement, the increases for employees under both the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) were to be phased in (employee deduction rates for special employee groups, like law enforcement officers and Members of Congress, are either .5 percent or 1 percent higher than regular employee deduction rates):

Until 12/98 7.00% 0.80%
01/99-12/99 7.25% 1.05%
01/00-12/00 7.40% 1.20%
01/01-12/02 7.50% 1.30%

Deduction rates would return to their 1998 levels on Jan. 1, 2003.

In 1999, the first phase-in took effect. A GS-13, step 1, manager, for example, saw payroll deductions totaling $134 more in 1999 than he or she would have if the change had not gone into effect.

Now with spiraling surpluses in the air, federal-friendly lobbyists and lawmakers are seeking to return deduction rates to their 1998 levels three years early: on Jan. 1, 2000.

"It is my belief that the temporarily increased retirement contributions enacted as part of the Balanced Budget Act of 1997 represent an unfair penalty against federal workers at a time when budget surpluses are predicted into the next ten years," said Sen. Paul Sarbanes, D-Md., when he introduced a bill to reduce the retirement deductions at the beginning of the month.

Sarbanes' bill is S. 1472. Rep. Tom Davis, R-Va., introduced the same bill in the House as H.R. 2631. The lawmakers, along with federal employee unions and professional groups, hope to convince the rest of Congress that the booming economy has negated the need for the retirement contribution increases.

Future Columns

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