Will Changes to Federal Employee Benefits Provide a Financial Windfall (or Disaster)? The Joy and Pain of the Rumor Mill

By on January 14, 2011 in News, Retirement

There has been plenty of bad news in recent weeks and months regarding federal pay and benefits. A proposal by President Obama to freeze federal pay for two years was enacted relatively quickly by the former Congress and there are proposals floating around to change the federal retirement system by using a formula of an employee’s “high five” earning years instead of the “high three” earning years. The result would most likely be a reduction in your future retirement annuity. (See Your Financial Future: Your Federal Employee Benefits and the Deficit Commission Recommendations and High Five vs. High Three: Is There a Difference In Your Retirement Annuity?)

And, as we have dutifully reported on our website, there are several proposals for cutting the federal workforce in one way or another. (See Commission Proposes “High-Three” to “High-Five” for Retirement, Pay Freeze and Changes to FEHB for Federal Employees)

Human nature being what it is, rumors inevitably start flying, even before the first word has been typed into a Congressional committee’s computer program. Before the internet, people would get on the telephone and tell one friend about the latest “news” and that friend would then contact others with a rumor that quickly morphed into a well-known “fact.”

The difference today is that a rumor can be sent out to large groups of people with one short email.

The numerous proposed changes are confusing. The confusion quickly leads to more rumors which, by the second or third iteration become an established “fact” even if the rumor is not true.

Rumor Number One 

Here is an example. We received several emails in the past couple of days about changes to federal pay and benefits. This is one of the emails that is similar to several others that we received:

“unfortunately (or maybe accurately) our local afge is confirming with staff that the high-5 recommendation and retirement age increase has quietly passed through congress and is awaiting president obama’s signature.”

We try to follow pending legislation and were skeptical that something that this noteworthy  for our readers would somehow have slipped through the legislative process without anyone knowing about it and making it known to the public.

And, in fact, it isn’t true. A knowledgeable source working on Capitol Hill quickly rebuffed the suggestion that this change had gone through Congress and was now sitting on the President’s desk. “It doesn’t work that way,” he said. He noted that this change would have likely gone from a sub-committee and then reviewed and reported by a committee and sent to the floor for a vote. From there, it would have gone to the Senate for a vote and would have to be approved before being sent to the President. All of this would have been reported in short order.

The current Congress is still setting up its committees. While the change from a “high three” to a “high five”  may be passed in Congress at some point, it has not happened and, if it does become enshrined in future legislation, it is not likely to be a stealth program that escapes public notice. Presumably, those strongly supporting such a measure will want to be recognized for their actions and take credit for cutting government spending and will be issuing press releases to discuss their concern for the American taxpayer.  Even if elected officials do not jump into full “photo op” mode, the legislation will be posted and available for us to read before it goes to the President for signature. 

Rumor Number Two

Another rumor that is circulating is actually a “golden oldie” that initially surfaced under the Clinton administration. We received several notes from readers similar to this one (although this one actually has a few more details than some of the others). As this is the internet age, and grammar and punctuation may only be a remnant of a past, pre-electronic era, here is one of the notes as it was received (with a minor modification indicated so it will be intelligible to readers):

“a co-worker that has friends on the hill advised me yesterday that a think tank (for a commitee) is proposing an offer (buy-out) unlike ones in the past. the plan would offer 5 years of credible service onto the employees total employment with no $ going out at the time of separation. granting 100% credit in dollars for both (annual leave and sick leave).” 

In other words, an unknown think tank is reportedly making a suggestion to an unknown committee about a possible buy-out for federal employees that would conveivably enrich some federal employees who are anxious to retire.

It is, of course, possible that such a proposal has been quietly made within the environs of Capitol Hill. The beauty of a rumor like this one is that since most of the details about the origin and the organizations that may be involved are unknown (but with specifics about how some people will benefit), it is impossible to completely refute it.  

The rumor that surfaced during the Clinton administration did not turn out to be true. There were buy-outs for some federal employees and some of these folks received a financial benefit, although the benefits were not as lucrative as many had hoped or as generous as the rumors had suggested. It is possible that the rumor circulating at that time may have had some truth in that a range of possibilities were considered by lawmakers and those working for elected officials. 

Our Capitol Hill source discounted this rumor as well and noted that it is too early to know what will emerge on this issue. While some group may be suggesting it to a Capitol Hill staff member, it has not emerged as a possibility that is being seriously discussed other than through the rumor mill.

No doubt, there will be proposed changes to federal benefits and we have made our readers aware of these concrete proposals as they emerge. Various changes will be discussed in the legislative process. Rumor are fun and interesting and may even have at least a germ of truth to them.

Don’t believe everything your hear or read and certainly don’t make an financial decision based on the possibilities envisioned by an unsubstantiated rumor. Whether a rumor reaches you by email or directly to your ear from a friend’s statement to you in a local watering hole, a rumor is just a rumor.

 

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

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

16 Replies

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  1. payfreeze sucks says:

    I see a huge disaster, how will the economy recover if we dont spend our money… less pay = less spending

  2. Bernard says:

    As I can retire on a moment’s notice, my only worry is that a “high-five” proposal would be quickly enacted, as the 2 year pay-freeze was, without giving me enough time to file my papers. I hope NARFE and other “sources” are on top of this proposal. It has more than a little credibility and would have lots of support among both parties.

  3. guest says:

    On the 5 year early buy-out rumor, there was such a program offered around 1988. I think that is why this rumor keeps surfacing. You could add 5 years to either your age or service. Back then it was only CSRS employees leaving. I’m not sure how it would work under FERS since they have to pay out until they retiree turns 62.

  4. Denise A Jones says:

    I think that it is sad that citizens, especially those who are federal employees do not know or understand the rudimentary democratic process and federal legislative process. It should be understood by those of us educated in this country especially how Congress works. Could this be why our REPRESENTATIVE democracy is not working well. And Fed Peasant while seemingly more knowledgable than many is incorrect on two counts. First, bills can originate in either House of Congress, while those that relate to money must originate in the House of Representatives. Secondly, HR designates a bill in House of Representatives( ex.H.R. 1 would be the first bill introduced in the first session of any numbered Congress, this is the 112 Congress). Secondly, a H. Res is a resolution by the House which is also numbered(H. Res 2) bills and resolutions are two difference animals. Bills become laws Resolutions DO NOT. Thomas is an excellent resource is you have information about the bill or resolution is you know subject and/ or number but is also good place to learn about the process of lawmaking in our so-called democracy.

  5. peon says:

    Hypothetical earnings of 72k, 74k, 76k, 78k, 80k would result in hi3 = 78k and hi5 = 76k. Under CSRS, 30 years of service yields 56.25% of hi3 ($43875) or hi5 ($42750). If hi5 is put into effect and you work one extra year, then hi5 = 77.6k (74k, 76k, 78k, 80k, 80k) and the pension would increase to 58.25% of new hi5 ($45202). In this particular example, working only one year longer will yield a higher pension under high 5 than you would get under high 3 without the extra year of work. Granted, you may not be able to work longer or just may not want to work longer, but I just wanted to show that a change to high 5 does not necessarily mean that you must work an additional 2 years. Run your own numbers before panicking.

  6. Fed Peasant says:

    When you really get serious about validation, search for a house resolution number (HR). Typically, legislation starts there. Next go to the Library of Congress web site called Thomas Locator. Research it for yourself. Check a variety of credible websites for federal employee news. Avoid the anti-government worker, anti-government sources such as the Cato Institute, Herritage Foundation, US Chamber of Commerce, & so on. http://thomas.loc.gov/

  7. Scion dePublius says:

    I like Rumer No. 2. Can I quote you now that its in print.
    I can’t imagine ANYTHING going “quietly through Congress” in its present state of rancor!!

  8. Lorenzo says:

    Sometimes even a rumor has an element of truth within. However you look at it, the federal civilian employees will get the shaft on way or the other.

  9. Reclamation_mushroom says:

    If Congress does pass into law the change from the high 3 to the high 5, will this affect people that are ready to retire or will it only be for new hires? I am not sure at this point. I have 29 1/2 years of service and I am looking forward to my retirement, but I was thinking I would work at least 5 more years to get all of my affairs in order and have a little more saved, but if they change this ruleing in a hurry, like they did the pay freeze, maybe I should re-think this decision and I should go sooner. What are your thoughts?

    • retired IRS says:

      This idea has been around for 10 years, and it has always been proposed to affect anyone who has not retired. This means that even if you are long since eligible, if you don’t retire prior to passage, or the effective date, you are screwed. Either jump ship, or stay an additional 2 or 3 years to merely make up the difference. If you have already maxed out, (already have the 42 years to reach the celing of 80%), there is no way you could make it up.

    • Retired Analyst, DIA says:

      My dear mushroom, the best advice I can give you is to retire sooner rather than later. In my 33+ years service I’ve never seen this level of anti-fed worker rhetoric. Congress can pass legislation quickly if they want to, so don’t allow yourself to get caught by surprise. Get to 30 years then punch out.

  10. FAA Engineer says:

    But I read some of the rumors on the Internets, and how could something on the Internets be false?

    • Management Attorney says:

      Back in the olden days, people would call a talk radio station and report they read garbage like this this in “the paper”. “The Paper”, of course, was a tabloid rag like the National Enquirer or the NY Daily News.

      In the early days of the internet(s), I used to see email threads of impending disasters/windfalls to prospective retirees and when I traced the thread to the bottom, they would invariably orginate from DOD employees.

      • FAA Engineer says:

        Those darn DoD employees. They think they’re so superior, flying around in their F-35s and those things they carry that shoot bullets and all those A-bombs.

        Wasn’t the Internets an invention of the DoD? HMMMMM. It all fits together.

        Not important. My owners have a plan for them, and it’s called BBQ.

  11. Guest says:

    Great article, Mr. Smith. Thank you!

    And I’m fairly sure that the upcoming changes to Fed employee benefits will not result in a windfall for us. I wish that was the case, but hey, it is what it is.

    Cheers.

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