THE DAILY FED
COLAs Saved, Retirement Cut
Cost-of-living adjustments for federal pensions will not be delayed next year, but federal employees will have to contribute more money to their retirement plans under the budget agreement the Clinton administration and Congress reached on Friday, The Washington Post reported.
A provision in President Clinton's budget plan to delay federal retirees' annual cost-of-living adjustments from January to April was removed under the agreement. Opponents of the provision said it was unfair to delay COLAs for federal retirees but not for retired military personnel or Social Security recipients. The delay would have saved about $1.7 billion over five years.
Federal employees will be asked to pay an average of $100 more per year toward retirement in 1999. By 2001, they will pay $200 more per year. The increased contributions would save the government $1.8 billion over three years.
Agencies will also be asked to contribute more to their employees' retirement funds. Agencies would increase their contributions to the Civil Service Retirement System from 7 percent of employees' salaries to 8.51 percent. The increase would be in effect from Oct. 1, 1997 to Sept. 30, 2002, and would save the government $3 billion. Agency contributions to the Federal Employees Retirement System of 11.4 percent of salary would not change.
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