Commission Proposes "High-Three" to "High-Five" for Retirement, Pay Freeze and Changes to FEHB for Federal Employees

By on December 1, 2010 in Current Events with 112 Comments

The National Commission on Fiscal Responsibility and Reform has issued a report today (December 1, 2010) that outlines its recommendations for long term ways to cut federal spending and reduce the deficit.  In summary, the Commission says that its plan will:

  • Achieve nearly $4 trillion in deficit reduction through 2020, more than any effort in the nation’s history.
  • Reduce the deficit to 2.3% of GDP by 2015 (2.4% excluding Social Security reform), exceeding President’s goal of primary balance (about 3% of GDP).
  • Sharply reduce tax rates, abolish the AMT, and cut backdoor spending in the tax code.
  • Cap revenue at 21% of GDP and get spending below 22% and eventually to 21%.
  • Ensure lasting Social Security solvency, prevent the projected 22% cuts to come in 2037, reduce elderly poverty, and distribute the burden fairly.
  • Stabilize debt by 2014 and reduce debt to 60% of GDP by 2023 and 40% by 2035.

Here are some of the recommendations likely to be of most interest to readers:

Unleash agencies to begin identifying savings

Every federal agency will need to do its part to live within tough spending caps. The Commission recommends that as part of their annual budget submissions and Congressional Budget Justifications, all agency heads should be required to identify a share of their budget recommended for cancellation and to identify ways to shift from inefficient, unproductive spending to productive, results-based investment. As a tool to improve productivity, agencies should be given a two-year window to conduct employee buyouts, and expanded latitude for personnel realignment. Congress should also consider a “BRAC commission” for terminating major weapons systems, appointed and headed by the Secretary of Defense, for trimming redundant or ineffective weapons from the Defense Department’s inventory.

Under the umbrella of adopting immediate reforms to reduce spending and make the federal government more efficient, one finds several key recommendations in the report:

  • Impose a three-year freeze on Member pay
    Members of Congress get an automatic salary increase each year.  This would be an immediate freeze on that for 3 years.
  • Impose a three-year pay freeze on federal workers and Defense Department civilians.
  • Reduce the size of the federal workforce through attrition.
    On this point, the Commission recommends “doing more with less” and cutting the federal workforce by 200,000 (10 percent).
  • Reduce federal travel, printing, and vehicle budgets.
  • Eliminate all congressional earmarks

In the realm of cutting taxes, the report has several ideas:

  • Cut rates across the board, and reduce the top rate to between 23 and 29 percent.
  • Dedicate $80 billion to deficit reduction in 2015 and $180 billion in 2020
  • Simplify key provisions to promote work, homes, health, charity, and savings while increasing or maintaining progressivity. It states that the new tax code must include provisions for:
    • Support for low-income workers and families (e.g., the child credit and EITC)
    • Mortgage interest only for principal residences
    • Employer-provided health insurance
    • Charitable giving
    • Retirement savings and pensions

In the realm of federal workforce retirement programs, the report lists the following recommendation and information:

REVIEW AND REFORM FEDERAL WORKFORCE RETIREMENT PROGRAMS. Create a federal workforce entitlement task force to re-evaluate civil service and military health and retirement programs and recommend savings of $70 billion over ten years.

Military and civilian pensions are both out of line with pension benefits available to the average worker in the private sector, and in some cases, out of line with each other across different categories of federal employment. The Commission recommends a federal workforce entitlement review to analyze civil service and military retirement programs in order to 1) Make program rules more consistent across similar programs, and 2) Bring both systems more in line with standard practices from the private sector. The review will have a ten-year savings target of $70 billion; recommendations of the task force would receive fast track consideration in Congress. Examples of program design reforms that the task force should consider include:

Use the highest five years of earnings to calculate civil service pension benefits for new retirees (CSRS and FERS), rather than the highest three years prescribed under current law, to bring the benefit calculation in line with the private sector standard.
(Saves $500 million in 2015, $5 billion through 2020)
Defer Cost of Living Adjustment (COLA) for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 to increase the benefit to the amount that would have been payable had full COLAs been in effect.

(Saves $5 billion in 2015, $17 billion through 2020)

Turning the Federal Employees Health Benefits Program into a defined contribution premium support program
that offers federal employees a fixed subsidy that grows by no more
than 1 percent over the gross domestic product each year. For federal retirees, the subsidy
could pay a portion of the Medicare premium.

(Saves $2 billion in 2015, $18 billion through 2020)

Finally, the report addresses the fiscal problems that the Post Office has faced in recent years:

Give Post Office Greater Management Autonomy
To put the Postal Service on a path toward long-term solvency, the Commission recommends reversing restrictions that prevent the Postal Service from taking steps to survive – such as shifting to five-day delivery and gradually closing down post offices no longer able to sustain a positive cash-flow.

You can download and read the full report from the link below.

Attachments

The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform (PDF)

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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  1. sinead9191 says:

    IF the proposed budget actually has the salary freeze provision for Congress in it, and IF that provision actually survives all the machinations Congress pulls on all proposed legislation, then I’ll believe that they actually are striving to at least spread the misery. However, I don’t believe it will survive, nor will they dare to propose the same freeze across the board for administration executives or the Supremes. Federal boots-on-the-ground employees have endured three years of frozen salaries imposed by the president, who then insulted us with the latest ONE PERCENT increase. It’s like throwing the stray mongrels a bone, while the pedigreed members enjoy filet mignon. As others have suggested, why is foreign aid not cut — particularly to countries that despise and denounce the U.S.? Why aren’t grants cut to the ridiculous “studies” such as the speed of the flow of catsup? Why are we still putting up with the Pork Barrel expenditures? Why are we subsidizing food, shelter, health care and education for ILLEGAL ALIENS? When do the lavish vacations by the first family, complete with anywhere from 100 to 900 in their entourage — during one of the worst economic periods in the past 50 years — stop? Why are some departments and congressional members and staff still staging “retreats” and “getaways” at plush resorts at taxpayer expense?
    I am more than willing to do my share to reduce our country’s debt, but I am NOT going to support ANY politician, regardless of party, who advocates forcing the average federal employee to make the sacrifice no one else inside the Beltway is willing to share! It’s called EQUITY. And there are provisions in our Constitution the Founders made to prevent having a royal family imposed on the people, along with a sycophantic noble “Court.” That’s called EQUALITY! Two wars were fought to attain and maintain that standard. Something for the Beltway crowd to remember.

  2. mwafarmergal says:

    It is very easy to list all the wonderful things that this budget is “supposed” to do, ex: reduce taxes, close loopholes, etc.etc. The reality is, however, that such statements are simply political and have no substance. Cutting retirements, the workforce and benefits are real. Where are the actual figures to substantiate all of the claims that Ryans’ budget proposes? Why is it that all the savings must come from federal employees (i.e. NOT CONGRESSIONAL federal employees)? Why does Ryan only look at cutting from the middle and lower classes and amazingly nothing is done to find savings from the top tier of income producers in this country? Why is it that foreign aid is not cut? Why is the military always targeted when talking of savings? Why are regular federal employees expected to do more with less and our congressman are riding in limousines? Why is it ok to cut benefits for federal workers who have been in civil service in excess of 30 years and protect the benefits of elected officials who have only a pitiance of actual service time? Why, Mr. Ryan, Why? When you can come up with some real answers perhaps the taxpayers will actually listen.

  3. Mary Ann says:

    Dear Mr. Ryan,
    Some of your suggestions are note worthy such as: abolishing the AMT, cutting back door spending in the tax code, 3-year wage freeze from the President including all federal employees, travel, foreign aid, “Pork Barrel” projects and especially the Congressional Earmarks. I “Disagree” with moving from high 3 to high 5 for computing ones retirement. I have worked for the Social Security Administration for close to 39 years and I am looking forward to realizing my dream of retiring in the near future. I think long term federal employees shoud be able to enjoy retirement. Hopefully, this issue “Wil lNOT” include the employees that have worked their “Whole Life” for the federal goverment. Hopefully, this issue should “Only” include newly “Hired” federal employees.

  4. good_reader1 says:

    Lets look at the law that was changed that allowed retired military to collect full pension and also then work and take a civil service position, not an entry level but a GS-13 or 15 position. It happens all the time at Air Force depots where active duty officers worked in offices then retired and took that job, even having to be trained by a civilain that was passed over for the job. They were hired by ba friend who was in management.  
    I heard a GS-15 say he wouldn’t go into the private sector because he wanted the time off offered in civil service, and he was an attorney.

  5. drawkcabssa says:

    When your wages are frozen for 3 years, does high 3 or high 5 make a difference?
    Come out from behind that curtain, Oz!!!!

  6. sulphide says:

    When they frozen Goverment wages for 3 years is there really any difference between high 3 and high 5?
    Come out from behind that curtain, Oz!!!!!!

  7. Fed123 says:

    The non stop assault on Federal Employees is ridiculous.  Where was all this anamosity in 1997 when I was making $24,000 a year with the Federal Government, while my classmates were making $50,000?  Our elected politicians have now turned the general population against Federal workers in an attempt to make themselves look better.  Oh we froze salaries, we are serious now….. Ok great you froze salaries, but FBI execs are flying around on Gulfstream Jets and illegals are collecting BILLIONS from the Treasury by claiming the Earned Income Tax Credit. The President’s family takes insane vacations when people on Long Island still don’t have heat from Sandy.  There is a serious disconnect with reality by the elected politicians.  I chose to make the government my career along time ago when it was not popular, do not change the rules of the game now.

  8. YoungFedBlood says:

    I want to see how they calculate the savings of going from high-3 to high-5 retirement system. I wonder if they are overlooking the fact that some (perhaps many) people will stick around for 5 years at their latest promotion, instead of the previous need for a mere 3 years. So then we have the new 5 year average converging on the former 3 year average PLUS we have to pay the salary of the newly made GS-13 (or whatever the latest highest grade is) for two extra years. I just want to know if the human response effect is considered in these savings calculations.

  9. Okichewy1 says:

    As a retired Military member after 20 years of service, I think messing with the military retirement system is bad.  Not just because I recieve it now, but because it is a good recruiting point for new enlistees.  Also, trying to make the private sector and military pension systems somewhat closer cant happen.  The military is given a pension for work performed 365 days a year, 24/7, spending time in combat zones, away from family for extended periods of time, etc.  Whereas, the private sector is paid for 40 hour week over 20 years, maybe some time away from family, no combat zone trips, etc.  It shouldn’t be thought of as a way to save money.  Now as a GS level employee, yes I agree with trying to figure out a way to align the Civil service pension with private sector (say Microsoft, Apple,  Google, etc).  But that will never happen since these Corporations are highly successful and have great pension plans.

  10. Garrettm1 says:

    All those promises and pledges the President made during the election where just a scam to get your vote.  You got what you wished for, another 4 more years of kayos and increase taxes for the middle class.  The outlook isn’t good folks.

  11. Garrettm1 says:

    Why is it so easy for our Bureaucrats (including our dear President) to give billions of our tax money over to foreign countries then (the other hand) take money away from our earnings (freeze our pay through 2015), increase our cost to health and make us pay more toward our retirement.  Brothers and Sisters, we need to stand up and voice our anger…  I mad, dam mad….. OneFedWorker…

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