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House Oversight Committee Recommends Extending Pay Freeze for 3 More Years

by Ian Smith |

At the end of last week, House Oversight Committee Chairman Darrell Issa (R-CA) sent a letter to the Joint Select Committee on Deficit Reduction (the “super committee”) recommending that it adopt some specific cuts to the federal workforce.

Most of the cuts are ones federal employees have heard suggested before in varying deficit reduction proposals. Although none have yet been enacted, they continue to be brought up in different discussions. The proposed cuts include:

  • Extending the pay freeze through 2015
    Federal employees’ pay is currently frozen for 2011 and 2012. This proposal would add three more years to the freeze.
  • Reduce the size of the federal workforce by 10%
    This proposal would reduce the workforce through attrition by hiring one new worker for every three who leave. Combined with the three year extension on the pay freeze, the CBO has estimated $247 billion in savings over 10 years.
  • Change pension formula from high three to high five
    According to the letter, the CBO has said that this change would save around $4.4 billion over 10 years.
  • Eliminate step increases
    According to Issa’s letter, “more than 99.9% of federal employees are awarded periodic ‘step’ increases based on tenure, although the law requires competent work performance in order to qualify. Approximately one-third of the federal workforce becomes eligible each year for a step increase, a raise worth about 3% of an individual’s base pay.” The letter also notes that step increases have continued under the current pay freeze. Based on data from OPM, savings are estimated to be around $1 billion in the first year from making this change with “savings increasing significantly in each subsequent year.”
  • Increase employees’ FERS contributions by 6.2%
    The CBO has said this would save around $121 billion over 10 years. The federal government would continue to pay the balance of the normal cost (12.7%) for FY 2012.
  • Increase employees’ CSRS contributions from 7% to 10% beginning in 2013
    The federal government would continue to pay the balance of the normal cost (25.8%) for FY 2011. According to the letter, by 2013, all CSRS participants will have had the opportunity to put in 30 years of service, thus qualifying for full retirement benefits. CSRS participants still working would be required to “share in the sacrifice being made by the federal employees enrolled in FERS.”
  • Eliminate FERS for new hires
    This proposal would use a portion of the savings from increasing the employees’ contributions to FERS to establish a defined contribution option payable at Social Security age to supplement the TSP. FERS employees with less than five years of service would be moved to this new contribution plan as well. According to the letter, most companies in the private sector have adopted similar changes for their new employees, and such a change would allow the government to “gradually end the fiscally irresponsible practice of accumulating large unfunded liabilities for retirees pensions.”
  • Limit the FERS minimum supplement to employees subject to mandatory retirement
    According to the letter, the process currently allows a federal employee retiring before age 62 to receive a payment representing the amount he would have received from Social Security if he were 62 the day he retired in addition to his FERS retirement benefit. This change would eliminate FERS supplement payments except for employees subject to mandatory retirement, such as fire fighters and law enforcement officers.

 

You can read the full text of the Oversight Committee letter and the proposed cuts it recommends.

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About the Author

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Ian Smith

Ian Smith is one of the founders of FedSmith.com. He writes about current topics that impact federal employees.

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