House Bill Would Extend Pay Freeze, Increase Retirement Contributions

By on December 9, 2011 in Current Events with 200 Comments

On Friday, Republicans in the House introduced legislation that would extend the current pay freeze on federal employees through 2013. The freeze would also include members of Congress.

In addition to the pay freeze, the bill also increases retirement contributions under both FERS and CSRS.

CSRS
For CSRS, the employee contribution increases from 7% to 8.5% of salary over three years beginning in 2013. The employee contribution for special occupational groups and Members of Congress is also increased by a total of 1.5% of salary over three years beginning in 2013. The employer contribution is reduced by the increased employee contribution. The government will continue to pay the balance of the normal cost (25.8% for FY2011). The increased employee contribution and corresponding reduction in the employer contribution applies to CSRS Offset employees.

FERS
For FERS, the employee contribution increases from 0.8% to 2.3% of salary over three years beginning in 2013. The employee contribution for special occupational groups and Members of Congress is also increased by a total of 1.5% of salary over three years beginning 2013, from 1.3% to 2.8% of salary. Under existing law, the employer contribution equals the normal retirement cost reduced by the employee contribution.

The legislation also would eliminate the FERS minimum supplement for individuals not subject to mandatory retirement beginning January 1, 2013. Individuals subject to mandatory retirement include certain categories of employees such as law enforcement, fire fighters, air traffic controllers, and nuclear materials couriers. Under current law, the FERS minimum supplement is paid to these employees and to federal employees who retire before the age of 62. The FERS minimum supplement represents the amount the employee would have received from Social Security if he were 62 years old on the day he retired, and is paid until the retiree reaches age 62 and begins receiving his actual Social Security payments.

New retirement structure
Finally, the legislation would introduce a new retirement structure for employees hired after December 31, 2012 with less than five years of credible service for retirement purposes. The employee contribution to FERS would increase from 0.8% to 4% of salary, an increase of 3.2 percent over current law. The employee contribution for special occupational groups and Members of Congress is also increased by a total of 3.2%, from 1.3% to 4.5%. Under existing law, the employer contribution equals the normal retirement cost reduced by the employee contribution.

The new retirement structure would also change the FERS pension formula salary base for all retirees to the highest-five years’ average salary. Existing CSRS and FERS employees remain subject to a highest-three years’ average salary base.

The FERS pension formula multiplier for basic retirees would also change to 0.7% points, instead of 1% (or 1.1% with 20 or more years of service). Employees in special occupational groups are subject to a proportional adjustment to the multiplier (0.3 percentage points lower than current law).

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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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