A Tale of Two Compensation Proposals

By Amanda Palleschi

February 23, 2012

Now that President Obama has signed into law a pension hike for new federal employees, it would be easy to think the recent merry-go-round of legislative proposals aimed at federal employee compensation is coming to an end.

But the debate is far from over.

The deal Congress reached last week extends the payroll tax holiday in part by increasing pension contributions of federal employees hired after Dec. 31, 2012, as well as those with less than five years of federal service, by 2.3 percent. New federal employees will now begin to see 3.1 percent of their salary go toward their defined benefit plan.

The pension hike is permanent and also applies to lawmakers and congressional staffers.

Even with that deal done, however, other key congressional proposals remain on the table. Most of them, labor unions and Democrats are quick to point out, would place a heavier burden on federal employees.

“Current federal employees are still on the chopping block,” American Federal of Government Employees National President John Gage said following the passage of the payroll tax extension deal last week.

A spokesman for AFGE told Government Executive that the organization won’t speculate on the fate of remaining or possible future measures targeting federal employee pensions, but last week Gage pointed to the debate on the transportation bill. A piece of federal pension legislation -- H.R. 3813 -- was inserted into the highway bill to help fund sweeping transportation and energy legislation.

H.R. 3813, sponsored by Rep. Dennis Ross, R-Fla., would eliminate the Federal Employees Retirement System annuity supplement and change the annuity calculation for new federal hires from using the average of their three highest salaries to a high-five average pay calculation. Current federal employees would bear more of the burden under this measure than they do under the deal cut last week, which affects mostly new hires.

Gage claimed Ross’ proposal would result in “a massive 40 percent cut to a federal employee’s retirement check.”

Still, it doesn’t sound like House Republicans are backing down from the provisions in the Ross bill. Although representatives from several of the committees involved in the highway bill would not predict the success of the provisions or how they would be packaged, it’s clear the measure already signed into law as part of the payroll tax deal didn’t fulfill the wish lists of House Republicans.

Spokesman Fred Piccolo told Government Executive that the Ross bill, which has been approved by the House Oversight and Government Reform Committee, is “much more comprehensive.” Piccolo said Ross was “disappointed” the bill was tied to transportation legislation because “he does not support the pension changes being used for anything other than deficit reduction.”

House leadership made the call to link federal pension provision to the transportation bill. The transportation committee’s primary concern is paying for its highway bill, with or without H.R. 3813.

“The committee will continue to work with leaders in the House to ensure that H.R. 7 [the transportation bill] will move forward without raising taxes, borrowing money or spending funds we do not have,” a spokesman for the committee said.

Unsurprisingly, neither House Democrats nor the White House has been pleased with H.R. 7. During a debate earlier this month, Rep. Louise Slaughter, D-N.Y., said the strategy to split up the highway bill created a “Frankenstein piece of legislation.”

By Amanda Palleschi

February 23, 2012