House passes bill requiring feds to pay more for retirement

By Eric Katz

December 20, 2012

House lawmakers passed legislation requiring spending cuts to accompany Speaker John Boehner’s Plan B tax proposal, including major changes to federal employee retirement plans, before Boehner pulled the Plan B bill from the floor Thursday evening for lack of GOP support.

The 2012 Spending Reduction Act, part of the Republican plan to address the fiscal cliff, includes provisions to increase the amount employees must pay into either the Civil Service Retirement System or the Federal Employee Retirement System. Federal workers would have to contribute 5 percent more into their retirement plans during the next five years, with the increase instituted incrementally.

President Obama threatened to veto the measure, saying "the approach put forward in this bill, virtually identical to earlier legislation, eliminates the defense portion of the pending sequester and does so in a way that imposes far greater cuts in the non-defense part of the budget than the existing sequester would entail."

National Treasury Employees Union President Colleen M. Kelley described the legislation -- which she said would also require agencies to reduce their workforces -- as a serious step in the wrong direction and applauded rejection of it by the White House and Senate. 

"Such drastic cuts are serious enough to cause difficulty in attracting or retaining talented people in the federal government," she said. "Our civil service is one of the best in the world, and it will not survive if these cuts are instituted."

The bill would result in employees under FERS paying 5.8 percent of their salaries by 2017, plus contributions to Social Security and Thrift Savings Plan accounts. Government workers enrolled in CSRS -- who currently contribute 7 percent of each paycheck to their defined benefit plan -- would give 12 percent by 2017 under the legislation.

Members of Congress and their staffs would face an 8.5 percent increase in their pension contributions during the same period.

The bill also would allow federal workers to roll unused annual leave into their Thrift Savings Plan. Currently, federal employees’ unused annual leave is cashed out when they retire or resign, and they are reimbursed for it directly with a check.

Federal employee unions voiced their opposition to the legislation early. 

Joseph Beaudoin, National Active and Retired Federal Employees Association president, wrote to House members calling for the bill’s defeat.

“Most federal employees make a modest salary and singling them out for deficit reduction flies in the face of those calling for tax relief for the middle class,” he said. “It’s time Congress found other ways to reduce the deficit than to continually take from our nation’s public servants.”

NTEU's Kelley also wrote to House members. “Make no mistake," she said, "an increased contribution toward one’s pension, with no corresponding increase in benefits, is a pay cut.” 

The House passed a version of the spending legislation in May with no Democratic support and the bill was never taken up in the Senate. 

This story was updated after the House passed the legislation. 

By Eric Katz

December 20, 2012