Move to Cut Federal Employee and Retiree Benefits May Begin This Year

Move to Cut Federal Employee and Retiree Benefits May Begin This Year

After the recent threat of partial government shutdown, federal employee organizations have warned that the next set deadline could eventually lead to a reduction in the benefits that both federal retirees and employees enjoy.

A few days before the Dec. 22 deadline, Congress accepted to continue agency spending authority temporarily. Congress passed a bill to extend funding beyond Jan. 19. The move to raise the spending limits for both domestic spending and defense was one of the policy issues that were set aside.

If the spending caps are not raised, similar ‘sequestration’ that occurred in 2013 (that resulted in furloughs in some government agencies and affected employees were not paid), could be triggered by the budget measures that are under consideration for the remaining part of the fiscal year.

Raising these caps, however, will lead to a cost-offsetting move with less spending in other areas. According to federal employee organizations, Congress usually looked to the federal workforce, considering the repercussion of this decision, such as double increment in employee contributions to retirement. Although, this applies to the workers first hired after these caps are raised.

Federal employee organizations expect that retirement contributions will be up for discussion by Congress, just like the ideas that have been addressed by Congress over time (some of these were just supported in 2017 by Congress). Some of the ideas are Paying Cost-of-Living Adjustments (COLAs) below the inflation rate for federal retirees and requiring Federal Employees Health Benefits (FEHB) enrollees to shoulder the larger share of the total cost of the premium.

All those proposals are very likely going to be considered by Congress because they would minimize government spending for a short time, but to the detriment of active employees and retirees. Other ideas like putting an end to the FERS Supplement for future retirees, basing future annuities on the high-5 salary years instead of high-3, and abolishing the defined benefit plan for future employees, will have great impacts for a longer time.

Deadlines like the one set for Jan. 19 has forced Congress to enact temporary extensions purposely to push the spending cap issued aside again. Nevertheless, such delays are short-lived. Any extension beyond January 31 means that the deliberations on the 2018 budget may extend into the fiscal 2019 process.

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