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Key developments in the world of federal employee benefits: health, pay, and much more.

Dueling Proposals for Feds’ Retirement Benefits, More Flexibility on TSP Withdrawals and More

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Federal retirement benefits are now in the crosshairs of both the Trump administration and congressional Republicans.

House Republicans’ 2018 budget blueprint released Tuesday would require civil servants to contribute more to their own retirement funds to help decrease the budget deficit, and it would eliminate annuity supplements for Federal Employees Retirement System participants who stop working before they are eligible for Social Security benefits.

These benefit reductions mirror cuts President Trump proposed as part of his fiscal 2018 budget, though the House GOP plan is less specific about how the cuts would be enacted. The House blueprint does not define the size of the employee contribution increase, nor does it stipulate which employees would no longer receive annuity supplements—all future retirees or only new hires.

This would push the responsibility to the House Oversight and Government Reform Committee, the legislative body that oversees the federal workforce. House Republicans mandated that the Oversight committee reduce the deficit by a minimum of $32 billion between fiscal 2018 and 2027, making the panel responsible for implementing retirement provisions as it sees fit.

Cuts pursued by the Oversight committee are likely to be less severe than those spelled out by Trump, though federal employee groups still opposed the House GOP budget blueprint.

Meanwhile, some Democrats on Capitol Hill are trying to swim against the tide and restore more generous retirement benefits. Legislation recently introduced by Rep. Anthony Brown, D-Md., would repeal an already-enacted increase in retirement contributions that affected federal employees hired in 2013 and after.

A 2012 law to extend unemployment insurance forced employees hired in 2013 and those with less than five years of federal experience to pay an additional 2.3 percent of each paycheck, for a total of 3.1 percent, toward their defined benefit. The 2013 budget agreement required all employees hired in 2014 or later and with less than five years of federal experience to pay a total of 4.4 percent of their salaries toward their Federal Employees Retirement System accounts. Employees hired in 2012 or earlier pay 0.8 percent of each paycheck into their retirement.

The 2017 Federal Employee Pension Fairness Act, which had 20 original Democratic cosponsors, would roll back the increases affecting those hired in 2013 and after, and was welcomed by federal employee groups. The National Active and Retired Federal Employees Association estimated that higher contribution rates will collectively cost affected employees $21 billion in pay over the first 10 years.

“Passage of [a repeal] would be the first step toward reversing the practice of dipping into the federal employee piggy bank to pay for other congressional priorities,” said NARFE Richard G. Thissen, in a statement. “It will help to ensure we can recruit and retain the best and brightest into public service. ...Providing our public servants adequate compensation is about more than just fairness; it is about maintaining an efficient and effective federal government.”  

Similar bills have been introduced before and have not made much headway.

One bill that appears to have more support is a bipartisan measure providing federal employees more flexibility in withdrawing money from their 401(k)-style Thrift Savings Plan accounts. The House Oversight and Government Reform Committee on Wednesday reported out the TSP Modernization Act (H.R. 3031) by a voice vote.

If passed into law, the TSP Modernization Act would allow federal employees and retirees to make multiple age-based withdrawals from TSP after leaving government, as well as let them change the timing and amount of regular payments. It is backed by the board that governs the retirement savings plan, and has a companion bill in the Senate (S. 873).

The House Oversight committee also on Wednesday advanced by voice vote the Bonuses for Cost-Cutters Act (H.R. 378), which would offer employees who expose wasteful spending a $20,000 bonus. The panel and its Senate counterpart approved similar bills last year, though the 2017 version would double the amount of the bonuses available.

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