Benefit Cuts Could Be Coming

THE DAILY FED

Benefit Cuts Could Be Coming

Both President Clinton and various Members of Congress advocated some higher retirement contributions in their fiscal 1997 budget proposals, but never pushed hard for them. Under the Clinton proposal, employees would pay an additional .5 percent of pay toward retirement. A House plan called for an additional 2.5 percent contribution. According to Federal Times, the bipartisan commitment to balancing the federal budget makes retirement reform likely as the fiscal 1998 budget is put together in the coming months.

At the same time, cost-of-living adjustments (COLAs) for retirees will be reduced if an advisory commission appointed to study the Consumer Price Index recommends changing how inflation is measured. COLAs are based on the index, which many experts say overestimates inflation.

The National Committee on Public Employee Pension Systems, a group of former civil servants, has been working for 15 years to reduce retirement benefits, which it argues creates an immense drain on the federal budget. The group has created a web site outlining its proposals.