In a letter sent Thursday evening to Vice President Joe Biden, leaders of 12 unions representing government workers urged the administration to preserve Federal Employees Retirement System pensions, currently under fire amid negotiations to reduce the deficit. Proposals to alter contribution rates unfairly target federal workers, they wrote.
"During the current debt ceiling crisis, federal employee pension taxes are being used to pay general U.S. debt obligations," the letter stated. "Triangulation is not a leadership strategy. Federal workers have already sacrificed enormously with the two-year pay freeze."
The future of federal employees' contributions to FERS is uncertain. In addition to discussions to increase workers' share as part of debt ceiling negotiations, the House-passed version of the fiscal 2012 budget resolution included a recommendation that would require federal employees to pay for half the defined benefit they receive with their pensions at retirement. Most employees currently contribute 0.8 percent of their salaries and agencies pay 11.7 percent, with the agency contribution set to increase to 11.9 percent in October. The Third Way, a centrist Democratic think tank, also has proposed government workers pay for more of their retirement plans, gradually phasing in hikes.
According to union leaders, such an increase in employee contributions represents a selective rise in payroll tax that could exceed 5 percent of employees' income. The hike would not be tied to any improvements in benefits, however, the letter stated.
The Treasury Department in May suspended investments into federal employees' pensions, when the government officially hit its debt ceiling of $14.3 trillion. Once the debt issue is resolved, the Treasury by law will be required to restore federal pensions and the Thrift Savings Plan's stable government securities (G) fund to their full balance, along with any interest lost during the suspension. The government expects to default on its obligations on Aug. 2, unless negotiators can come to an agreement.
Current and former lawmakers have jumped in on the pension debate. Sen. Barbara Mikulski, D-Md., on Monday urged Treasury Secretary Timothy Geithner to protect federal pensions during budget negotiations. She also criticized the idea that government workers should contribute more to their retirement plans in an effort to cut spending. Sens. Richard Burr, R-N.C., and Tom Coburn, R-Okla., have introduced legislation that would end the FERS-defined benefit plan for new federal employees, including new members of Congress, starting in 2013.
Congress is not looking in the right place to find real savings, said former Rep. Tom Davis, R-Va., during a Thursday conference in Washington sponsored by the Senior Executives Association. Davis, now U.S. sector leader of federal government relations at Deloitte, said entitlement spending in programs like Medicare is where the real money is.
"Trying to squeeze it out of the basics of government is not where it is," he told a group of senior executives. Davis said proposals targeting federal employees' benefits, such as requiring them to contribute more to their pensions, should also apply to lawmakers.