The Republican Study Committee has released a budget blueprint for FY 2013 which would mandate increased pension contributions for all federal workers rather than just new hires.
Following on the heels of the House Budget Committee’s recently announced budget, the RSC plan touts that it will balance the federal budget in five years. The budget proposal would cut discretionary spending to $931 billion and freeze it until the budget balances in 2017. Defense spending is the same as the House Budget Committee proposal. Non-defense shrinks from $377 billion in FY 2013 to $329 billion in FY 2022. It also includes provisions to protect defense spending from sequestration.
The part of the proposal that will interest federal employees, however, relates to pension contributions. The proposal references the recent CBO report showing that, on average, the federal workforce generally fares better than the private sector workforce with respect to overall compensation.
Further, the RSC proposal notes that federal employees hired since 1984 (FERS) “are entitled to a hybrid pension, which includes a 401(k)-style plan that the government matches up to five percent and a defined-benefit payment,” whereas private sector workers “typically only get a 401(k) with a three percent match.”
The plan continues, “Considering that federal workers contribute only 0.8 percent of their pay to the Federal Employees Retirement System, this is a recipe for a shortfall. Taxpayers now chip in 11.7 percent of employees’ salaries to keep the system solvent. The Middle Class Tax Relief and Job Creation Act of 2012 requires new federal employees to contribute more towards their retirement annuity. However, no changes were made for current federal employees. The RSC budget would require all federal employees to pay more towards their retirement. This saves $110 billion over ten years.”
What isn’t stated is how much more of a contribution might be required by current employees. Paul Ryan (R-WI) had said in a press conference when his budget proposal was released that federal workers should have to pay half of their pensions themselves. Perhaps this proposal might ultimately follow that suggestion as well.
Federal retirees would see a change as well. The RSC proposal suggests adopting an accurate inflation measurement for federal retirees, rather than using the CPI-W (consumer price index for urban wage earners and clerical workers): “The CPI-W, according to most analysts, overstates the actual level of inflation in the economy, at a higher cost to taxpayers. The RSC budget would more accurately measure inflation for federal retirees by basing it on the Chained CPI-U, resulting in a savings of $26 billion over ten years.”
The RSC plan also includes reform suggestions for the Federal Employee Health Benefits Program (FEHBP). It proposes to strengthen competition among healthcare plans in the system by incentivizing consumers to choose lower cost plans by only covering the first $5,000 of individual premiums or the first $11,000 of family premiums beginning in 2014. Currently the government pays a percentage of the total premium, usually somewhere around 70%.
