A legislative deal that requires new federal hires to contribute more to their government pensions spares current employees, but they’re still very much at risk, observers warned.
Lawmakers and the Obama administration reached an agreement Wednesday night to extend the payroll tax holiday. Under the plan, current employees -- most of whom contribute 0.8 percent now to their defined benefits under the Federal Employees Retirement System -- would not see their contribution rate rise. There are conflicting reports about the exact percentage increase that new federal workers (those hired after Dec. 31, 2012) would have to contribute to their pensions -- whether it is a total of 2.3 percent or an additional 2.3 percent on top of the current rate for a total of 3.1 percent. The increase would also apply to newly elected members of Congress.
The payroll conference committee leadership is expected to file their report with the details of the deal later Thursday. The hike is designed to help offset the cost of extending unemployment benefits through the rest of the year.
Carl Goldman, executive director of the American Federation of State, County and Municipal Employees Council 26, called the agreement to increase the amount new workers contribute to their government pensions “race-to-the-bottom economics.” Colleen Kelley, president of the National Treasury Employees Union, said requiring federal workers to pay more toward their defined benefit plan will harm their ability to invest in their Thrift Savings Plans.
Negotiations over including changes to the federal pension system in the payroll tax cut extension bill came to a head this week. Republican lawmakers wanted the increase to apply to current federal workers as well, but ran into resistance from Washington-area congressional members who represent a large contingent of government employees.
"We are pleased that we were able to ensure that this agreement has no negative impact on current federal employees but we still strongly oppose the provision that raises $15 billion to help offset the cost of this package from future workers,” said Sen. Ben Cardin, D-Md., and Rep. Chris Van Hollen, D-Md., in a joint statement on the deal. “Unemployment insurance benefits are paid out during true economic emergencies and should not require offsets. We want this process to move forward. We will not let others find excuses to extend the gridlock. But it is inherently unfair that the primary offset found for extending unemployment insurance came from additional sacrifice from other middle-class families rather than the very wealthiest Americans who can afford to pay more but continue to pay less." Cardin and Van Hollen were conferees on the payroll conference committee.
There are still several other separate legislative efforts pending, however, that would affect federal pay and benefits. President Obama’s fiscal 2013 budget proposal recommends increasing the amount federal employees contribute to their government pensions by a total of 1.2 percent over three years beginning in 2013. The administration estimates the increase would save the government $27 billion over the next decade.
“Make no mistake, current federal employees are still on the chopping block,” said John Gage, president of the American Federation of Government Employees, in a statement. “House leaders want to squeeze more out of federal employees to pay for the massive transportation bill.”
The GOP House leadership inserted stand-alone legislation (H.R. 3813) modifying the federal pension system into the massive transportation funding bill. H.R. 3813, introduced by Rep. Dennis Ross, R-Fla., would require federal workers and members of Congress to contribute a total of 1.5 percent more over three years beginning in 2013 to their defined retirement benefits, among other provisions. Earlier this week, the House Rules Committee decided to break out H.R. 3813 into a separate piece of legislation again to be considered along with other measures related to energy and natural resources issues. Rules Committee Ranking Member Louise Slaughter, D-N.Y., called the highway bill a “Frankenstein piece of legislation.”
It’s unclear what will become of H.R. 3813 if federal pension-related provisions are included in the payroll tax cut deal. Rep. Ross, who introduced H.R. 3813 as way to bring the federal pension system more in line with private sector plans and to reduce the overall deficit, is not happy about his bill being used as a mechanism to pay for funding in the payroll tax cut extension deal or transportation programs.
“That entire impetus for the bill has been lost in this pay-for farce,” said Fred Piccolo, Ross’ chief of staff. “If 3813 is used for anything other than debt reduction, we will oppose it, and if it does not treat members of Congress equally with the rest of the federal workforce, we will work to defeat it.”
The House is expected next week to debate the provisions related to government pensions in the highway bill.
The payroll tax cut compromise “fails to protect current federal workers from being the offset in future spending measures, including the surface transportation bill,” said Matt Biggs, legislative and political director for the International Federation of Professional and Technical Engineers. “This continues to beg the question: When will someone other than federal workers be asked to sacrifice?”
Julie Tagen, legislative director for the National Active and Retired Federal Employees Association, echoed that concern. “We cannot be used continually as Congress’ piggybank,” she said. “So far this year, Congress has proposed using federal worker paychecks to offset the costs of the payroll tax holiday, highway bill, U.S. Postal Service and the Pentagon budget.”