A Mixed Budget Bag for Feds

Obama’s fiscal 2014 plan recommends a pay raise, but also a pension contribution hike from employees.

Budget Day 2013 has finally arrived. Federal employees should not be surprised by the pay and benefits proposals in President Obama’s latest plan, as this is a well-traveled road with all the familiar twists and turns.

Obama wants government workers to contribute more to their pensions starting in 2014, a proposal he also floated in his fiscal 2013 budget plan. Right now, most feds contribute 0.8 percent of each paycheck to their pensions; the president’s proposal would increase that by 1.2 percent, phased in over three years, resulting in a 2 percent contribution level by 2017. In the area of federal pay and benefits, that’s a rare example of agreement between the White House and most congressional Republicans.

It’s always been a matter of when, not if, current federal employees will have to pay more for their retirement benefits. Between the president’s fiscal 2014 proposal and the recent House-passed budget blueprint, which recommends that feds pay more for their pensions, it looks like this idea’s time finally has come. Remember, new hires after 2012 and those with fewer than five years of previous federal service now have to contribute 3.1 percent toward their defined benefit plan -- 2.3 percent more than what current government workers in the Federal Employees Retirement System pay toward that portion of their retirement.

The president is also calling for a 1 percent pay increase for federal civilian workers and military service members in 2014. The military pay raise is almost certainly a done deal, but look for a fight in Congress in the coming months over lifting the current three-year pay freeze for civilians.

Civilian and military retirees aren’t going to be happy if, as the budget proposes, the government switches to a less generous formula to determine cost-of-living adjustments for federal retirees and Social Security beneficiaries. The chained Consumer Price Index, or chained CPI as it’s known in Washington-speak, is viewed by many as a more accurate measure of how people substitute one item for another during inflation. The result for retirees would be lower COLAs over time. The switch to the chained CPI formula long has been on the table in deficit reduction negotiations between the White House and Capitol Hill.

On the (somewhat) bright side, the administration is also seeking to modernize the Federal Employees Health Benefits Program. Check out some of the proposals here.

Average Fed Pay Is Up

The government is into its third year of a pay freeze on civilian workers. But according to the Office of Personnel Management, the average federal salary for all employees increased $1,547 between December 2010 and September 2012, from $74,807 to $76,353. The typical salaries of non-seasonal full-time permanent employees rose from $76,701 at the end of 2010 to $78,467 in September 2012 -- an increase of $1,766.

Click here for OPM’s 2012 and 2011 reports on federal salaries.

While the annual, across-the-board pay raise has been frozen since January 2011, federal employees are still eligible for bonuses, step increases and other awards. The Office of Management and Budget, however, has directed agencies to withhold discretionary monetary awards, which include annual performance awards, unless they are legally required during sequestration.

TRICARE Contractor Changes

TRICARE beneficiaries living in the 21-state West Region have a new contractor. On April 1, UnitedHealthcare Military & Veterans took over the Tricare contract for that region from TriWest Healthcare Alliance. Affected enrollees received welcome packets in February and March with transition and contact information for UnitedHealthcare. Apparently the volume of calls and inquiries to the website has been high since the switch and beneficiaries and providers are asked to “be patient.” Easier said than done.

A few reminders for affected beneficiaries from TRICARE:

  • TriWest Healthcare Alliance authorizations are good until the end date or May 30, 2013, whichever comes first.
  • TriWest maternity care authorizations are good for 312 days after the start date; the May 30, 2013, end date doesn’t apply.

West Region beneficiaries with questions about their health care can contact UnitedHealthcare at 1-877-988-WEST or visit the UnitedHealthcare website.

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