House panel votes to increase amount feds contribute to pensions

By Kellie Lunney

February 7, 2012

A House committee approved a bill Tuesday evening that would increase the amount federal employees and lawmakers contribute to their government pensions.

Lawmakers on the House Oversight and Government Reform Committee split along party lines in a 22-to-16 vote to approve legislation that would require federal workers and members of Congress to contribute a total of 1.5 percent extra over three years beginning in 2013 to their defined retirement benefits. Republicans supported the measure, while Democrats opposed it.

For employees covered under the Federal Employees Retirement System, that would work out to 2.3 percent of each paycheck while lawmakers would contribute 2.8 percent of each paycheck to their pensions. Those in the Civil Service Retirement System, which FERS replaced in the 1980s, would see their individual contribution rates per paycheck rise from 7 percent to 8.5 percent over the same time frame under H.R. 3813.

The bill also eliminates a current provision in the law that supplements the retirement benefits of feds not subject to mandatory retirement who are covered under FERS and retire before age 62, or the age at which their Social Security benefits can kick in. Many of those affected have nearly 30 years or more of public service.

"At a time when Republicans and Democrats are both striving to find a way to keep paychecks level for America's middle-class workers, it's hypocritical that a majority of the House Oversight Committee would vote to force middle-class federal workers to pay an extra 1.5 percent of their salaries each paycheck toward their retirement,” said Joseph A. Beaudoin, president of the National Active and Retired Federal Employees Association, in a statement.

The bill’s sponsor, Rep. Dennis Ross, R-Fla., noted that the legislation’s provisions “apply equally to members of Congress and federal employees.”

In a rare bipartisan moment, the committee approved an amendment from Rep. Stephen Lynch, D-Mass., that would allow retiring federal and Postal Service employees to deposit lump sums from their unused annual leave into their Thrift Savings Plan accounts to boost their savings. The amendment was based on a 2010 bipartisan bill co-sponsored by Lynch and Rep. Jason Chaffetz, R-Utah.

“It cannot always be about taking,” said Chairman Darrell Issa, R-Calif., in expressing support for the amendment. “If we say we want to harmonize, we need to harmonize on both sides of the ledger.”

Committee Democrats and Republicans expressed the now-familiar arguments espoused by their respective parties on the issue of reducing federal compensation. Democrats took issue with Republicans linking changes in congressional pay and benefits to those affecting federal workers, while also arguing that asking federal employees to contribute more in the name of deficit reduction is unfair.

Federal workers currently are subject to a two-year pay freeze, and there are several proposals floating around that would extend the salary freeze. “They [feds] should not have to face additional reductions in their take-home pay while the economy is still fragile,” said Rep. Elijah Cummings, D-Md., ranking member of the committee and a lawmaker with many federal workers in his district. Cummings, who referred to federal employees as “middle class folks,” offered amendments, which failed, that would have exempted government workers earning less than $100,000 a year from the provisions in the legislation and another, separate measure that would have exempted those earning less than $30,000 annually.

Democrats repeatedly put H.R. 3813 in the context of the current federal pay freeze, arguing that increasing the amount feds contribute to their pensions would further reduce their overall compensation. For his part, on the subject of pay freezes, Issa said they only should be viewed as a short-term tool to cut spending. “I agree that pay freezes are not a long-term solution to attracting the best and the brightest.”

Committee Republicans, particularly Ross, emphasized the need to cut spending and reduce the deficit, claiming modifications to the federal retirement system should be part of that effort. Issa said the federal retirement system needs to be changed, pointing out that many of the provisions in H.R. 3813 would affect future employees -- not break faith with current workers.

“We are asking current employees to contribute a small, additional amount to their retirement,” Issa said, while conceding that those contemplating an early retirement could be affected by the elimination of the FERS annuity supplement. The chairman, however, said the most substantial change in the bill is a provision that would place those hired after Dec. 31, 2012 under a high-five average salary calculation for annuities rather than the current high-three average pay calculation. The current FERS-defined benefit pension is calculated by taking the retiree's three highest salaries and dividing it by years of service and a variable pension accrual rate. Existing CSRS and FERS employees still would operate under the high-three calculation under H.R. 3813.

Issa noted that switching from a high-three calculation to a high-five one was a recommendation of the Simpson-Bowles Fiscal Commission, a panel appointed by President Obama and led by former Republican Sen. Alan Simpson from Wyoming and former Clinton White House Chief of Staff Erskine Bowles.

H.R. 3813 also would require federal employees hired after Dec. 31, 2012, and newly elected lawmakers to contribute 4 percent to their defined retirement benefits; special occupational groups, including law enforcement employees hired after that date, would contribute 4.5 percent to their pensions.

Ross said the federal pension system must be brought more into line with private sector workforce retirement benefits. Citing Towers Watson, a Virginia-based human resources consulting firm, Ross noted that only 13 of this year’s Fortune 100 companies offered new employees a traditional defined benefit plan in 2011, compared to 58 in 2003. “It is clear that the taxpayer cannot afford to continue to maintain the current federal pension cost structure over the long term,” Ross said in his opening statement. Ross is chairman of the House Oversight and Government Reform federal workforce subcommittee.

The average federal pension under FERS is between $12,000 and $13,000 per year, according to the Office of Personnel Management, while the typical pension under the Civil Service Retirement System is around $35,000 annually. The average annual pension for lawmakers in 2010 was $53,940, according to OPM.

By Kellie Lunney

February 7, 2012