2021 Budget Proposals Seek to Change Benefits of Federal Employees
The fiscal year 2021 budget proposal has some familiar proposals when it comes to certain benefits of federal employees, such as retirement benefits and contributions, the G Fund, FEHB premiums, and more.
The matter that would be most affected in terms of money will be if employees are mandated to pay more for their retirement contributions until both have contributed 50% on each side. The proposal would like to have a 1% increase each year for six years so that it will eventually be 6% more than employees will contribute to their retirement. Many under FERS will be affected, except for those that started employment in 2013 or later as they have higher contribution rates than those that worked earlier than 2013.
This change would have employees contribute about $87 billion in a decade, instead of the government.
Another proposal wanted to remove cost-of-living adjustments (COLAS) for employees under FERS while cutting 0.5 percent of COLAs for retired workers under CSRS.
There is also a suggestion to eliminate the special retirement supplement, which is a benefit some retirees may receive until they can claim Social Security benefits at 62. Though the budget proposal did not specify matters in detail, it is likely that this change would be for new hires, and there would be exemptions for those that are in positions that require them to retire before the age of 62, such as federal law enforcement, as there have been more details on these matters in the past proposals.
There is also a proposal to change the annuity calculations from the high-3 salary formula to a high-5 salary formula. In other words, instead of using the highest three consecutive years of earnings, they would extend it to 5 years to calculate your annuity payments.
The last proposal I will mention in this article is regarding FEHB (Federal Employees Health Benefits) premiums. The current administration would like to have the government pay fewer contributions to lower-performing plans while providing more money for plans with higher performance. This would encourage more participants to join better quality plans, which would make it more affordable due to the competitive pricing there will be with providers.