The Pay and Benefits Rollercoaster

The Pay and Benefits Rollercoaster

Federal employees took a ride on the pay and benefits rollercoaster this year, and it was quite a rickety ride.

The best example of this phenomenon was the performance of the Thrift Savings Plan, which managed to throw everyone for a loop in 1998.

In August, the TSP's C Fund dropped a whopping 14.5 percent, the biggest one-month fall since the creation of the TSP a decade ago.

The steep decline in the C Fund-which invests in common stocks-was due to the shaky performance of the stock market at the end of the month. In just one day, Aug. 31, the Dow Jones industrial average dropped 513 points.

The C Fund swiftly recovered from August's drop, gaining 6.3 percent in September.

Changes to the federal retirement and health benefits systems provided more twists and turns in 1998.

In October 1997, a last-minute addition to the Treasury-Postal appropriations bill provided for an open season to allow employees in the Civil Service Retirement System to switch to the Federal Employees Retirement System. After reviewing the bill, President Clinton used his line-item veto power (later ruled unconstitutional by the Supreme Court) to cancel the CSRS-FERS switch. Administration officials had estimated the proposal would cost agencies $854 million over five years. The National Treasury Employees Union filed suit against Clinton's action.

A federal judge later approved an agreement between NTEU and the Justice Department to rescind President Clinton's veto. The administration then asked Congress to cancel the open season in its fiscal 1999 budget proposal, but Senators and Representatives did not do so. Feds breathed a sigh of relief.

By the end of the year, it seemed like switching plans was proving to be less popular than initially thought. With five weeks remaining before the deadline to switch plans, less than 1 percent of the more than 1.1 million workers eligible to change had opted to do so.

"We've been a little underwhelmed," acknowledged William Flynn, associate OPM director for retirement and insurance, at a Nov. 17 conference of the International Personnel Management Association.

In September, OPM added another knot to federal employees' already queasy stomachs, when it announced that premiums under the Federal Employees Health Benefits Program will rise an average of 10.2 percent in 1999, the largest increase in nearly a decade.

Employees' costs will rise 7.4 percent in 1999, OPM said. Employees' agencies will cover the rest of the premium increases. The government covers 72 percent of the weighted average cost of health plans, under a new formula Congress approved last year for splitting insurance costs between employees and the government.

The average employee will pay $3.39 more every two weeks, while the government will pay $12.07 more.

Members of Congress immediately questioned the hike, while OPM said employees could reduce the effects of the increase by shifting to lower-cost plans.

However, employees will have fewer plans from which to choose, because 65 plans decided to stop covering federal employees in 1999. In 1998, 350 health plans offered insurance under FEHBP. In 1999, only 285 plans will participate in the program. OPM attributes the decline to shakeouts and consolidations in the health-care industry.

President Clinton did bring some good news to federal workers and veterans alike. In a Veterans Day ceremony, Clinton announced he had signed the Veterans Programs Enhancement Act (H.R. 4110), which gives disabled veterans the same 1.3 percent cost-of-living increase given to Social Security and veteran pension beneficiaries.

Clinton also signed into law the Federal Employees Life Insurance Improvement Act, which has the potential to provide new life insurance opportunities for federal workers.

The bill, H.R. 2675, directs OPM to present to Congress legislation offering federal employees group universal life insurance, group variable life insurance and additional voluntary accidental and dismemberment insurance policies.

Federal retirees didn't fare as well. They will get a 1.3 percent cost-of-living increase in 1999, the lowest since 1986. The Clinton administration says the small increase is due to low inflation that has kept wages and prices down.

On the pay front, feds are sitting tight, waiting anxiously to climb the compensation hill.

President Clinton has approved a 3.6 percent pay raise for federal employees and military personnel in 1999. But Clinton has proposed a 4.4 percent raise in 2000.

Top-tier Senior Executive Service members will not get a raise in 1999, but they will be eligible for bigger bonuses, under a provision included in the Treasury-Postal spending bill. The cash award that accompanies Presidential Rank Awards will also rise in 1999.

Still, groups that represent civil servants before Congress have one priority in 1999: Better pay.

"We have three priorities: Pay, pay and pay," said Senior Executives Association President Carol Bonosaro, who represents the federal government's highest-ranked employees.

"Our goal for the 106th Congress is the same as for 105th, and that is to focus the Congress on the tremendous federal employee pay gap and have Congress come to grips with the fact that in order to attract and retain a qualified and dedicated workforce, it has to pay for it," National Treasury Employees Union President Robert Tobias said.

Buckle your seatbelts.