Pay and Benefits Watch 1997 Recap

For the federal workforce, 1997 could have been worse. The year began with proposed cuts of $12 billion to federal pay and 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. In the end, federal employees still took a $4.9 billion blow to their benefits. Employees will have to pay an additional .5 percent toward their retirement, while agencies will have to contribute 1.51 percent more toward the Civil Service Retirement Fund. Here's a round-up of other 1997 pay and benefits news and a look at what's ahead in 1998.
  • Federal employees received an average 2.8 percent raise, taking effect the first pay day of the new year. Members of the Senior Executive Service received the same raise as General Schedule employees. Senior executives at the highest pay level have had their salaries capped for four years because Congress denied itself a raise for four years, but finally granted itself one this year.
  • After a topsy-turvy year for a measure that will allow employees enrolled in the Civil Service Retirement System to switch into the Federal Employees Retirement System, the Clinton administration agreed at the end of December to allow an open season in mid-1998. The measure was originally a last-minute addition to the Treasury-Postal spending bill. But the President line-item vetoed the measure Oct. 16, citing the prohibitive costs of allowing employees to switch. The National Treasury Employees Union filed a lawsuit challenging the veto, which prompted the administration to settle the matter out of court.
  • Under the budget agreement President Clinton signed this summer, employees under both the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) will have to pay .5 percent more of their paychecks toward retirement. Here's how the increases will be phased in (employee deduction rates for special employee groups, like law enforcement officers and Members of Congress, will be either .5 percent or 1 percent higher than regular employee deduction rates):
    Period CSRS FERS
    Now-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%

    In addition, agencies will be required to pay an additional 1.51 percent of each employee's salary every year into the Civil Service Retirement System from October 1997 through September 2002.
  • Health insurance premiums went up an average of 8 percent in 1997 because of rising health care industry costs. Next year a new formula will go into effect for determining premiums. The new formula, called the "fair share" formula, will stabilize the government's share of health care costs around 72 percent.
  • Federal retiree cost-of-living adjustments (COLAs) will be issued at the same time as Social Security COLAs in 1998. Retirees under the Civil Service Retirement System will receive a COLA of 2.1 percent in their January paychecks, while Federal Employees Retirement System enrollees will receive a 2 percent COLA. The administration's original budget proposal would have delayed federal retirees' COLAs a few months each year.
  • Sen. Barbara Mikulski, R-Md., is sponsoring a bill that would reduce the pension offset for people receiving government pensions and spousal Social Security benefits. For more information, click here.
  • Del. Eleanor Holmes Norton, D-D.C., has introduced four bills aimed at preventing federal work from being contracted out. The bills are H.R. 885, 886, 887, and 888.
  • Rep. Connie Morella introduced a bill, H.R. 2526, that would allow federal employees to invest up to the IRS limit of $10,000 in 1998 to the Thrift Savings Plan. Employees can currently only contribute up to 10 percent of pay if they are enrolled in the Federal Employees Retirement System.
  • A fix for federal employees placed in the wrong retirement system was stalled late in 1997, but is expected to resurface early in the 1998.
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