Payroll tax cut deal requires new hires to contribute an additional 2.3 percent to their retirement benefits.
New federal hires will have to pay 2.3 percent more toward their government pensions under a deal Congress approved Friday to extend the payroll tax holiday.
Federal employees hired after Dec. 31, 2012, and those with less than five years of federal service must contribute an additional 2.3 percent for a total of 3.1 percent to their defined benefit plan to help pay for a yearlong extension of unemployment benefits. The measure also applies to new congressional employees and newly elected members of Congress. 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.
The pension hike is a permanent change; the legislation funds the payroll tax cut extension and unemployment benefits just through 2012.
The House voted 293-132 to approve the conference report containing the federal pension provision; the Senate approved it in a vote of 60-36. In addition to extending unemployment benefits, the legislation also extends the payroll tax cut and averts cuts in Medicare reimbursement fees to physicians through 2012. President Obama is expected to sign the bill into law.
Many Washington-area lawmakers who represent hundreds of thousands of federal employees voted against the legislation because of the provision increasing the amount that new hires have to contribute to their pensions. The measure will pay for half -- $15 billion -- the cost of extending unemployment benefits.
“I am sick and tired of some members of Congress badmouthing and belittling federal employees,” said Rep. Chris Van Hollen, D-Md., who was a member of the House-Senate payroll conference committee. Van Hollen, who said he supported extending the payroll tax holiday and unemployment benefits, nevertheless voted against the legislation. Others voting against the bill included Democratic Reps. Gerry Connolly of Virginia, Elijah Cummings of Maryland, Donna Edwards of Maryland, Steny Hoyer of Maryland, Jim Moran of Virginia, and Republican Frank Wolf of Virginia. “This bill sends a signal to our federal workforce that we do not appreciate their hard work,” said Moran. On the Senate side, Democratic Sens. Ben Cardin of Maryland, Barbara Mikulski of Maryland, and Mark Warner of Virginia opposed the bill.
Several lawmakers in both chambers spoke out against the federal pension provision in the payroll tax cut extension bill. “Our federal employees are not a piggybank. We should not reach into their pockets every time we have to pay for something,” said Cummings.
“While there are many federal employees in the capital region, it is worth noting that more than 85 percent of the workforce is outside of Washington,” said Wolf. “Eighty-five percent. More than 65 percent of all federal employees work in agencies that support our national defense capabilities as we continue to fight the war on terror.”
Federal employee advocates also criticized the changes to the federal pension system. “This legislation sets a dangerous precedent by sending the message that future civil servants can serve as the downpayment for legislation needing funding,” said Patricia Niehaus, president of the Federal Managers Association. “Federal employees are not only being targeted in the name of deficit reduction, but now it seems Congress is willing to use them as a means to pay for any [emphasis in original] legislation.”
Gregory Junemann, president of the International Federation of Professional and Technical Engineers, said the pension provision pits younger federal workers against those already working for the government. He also cautioned that while the measure in the payroll tax cut extension agreement targets new hires, it doesn’t bode well for existing federal employees. “For those not immediately affected, we would remind them that once a third-tier retirement plan is established, it will become the new baseline and will fuel future calls for additional punitive payroll deductions or cuts for all federal workers.”
There are still several other separate legislative efforts pending 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.
The GOP House leadership inserted stand-alone legislation (H.R. 3813) modifying the federal pension system into the massive transportation funding bill. Introduced by Rep. Dennis Ross, R-Fla., H.R. 3813 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 now that the federal pension-related provisions were approved in the payroll tax cut deal.