President's Budget Proposes Increased Retirement Contributions for Federal Workers

Although it is arriving about two months late, the White House has released its budget proposal for 2014 this week. The budget contains some recommendations that would directly impact the federal workforce.

For 2014, the president is proposing a 1% pay increase for the federal workforce. The budget also proposes to freeze pay for senior political officials.

The White House budget proposal for 2013 recommended giving federal workers a 0.5% pay increase which never materialized.

The proposal reads:

Just as families and businesses across the country are tightening their belts, so too must the Federal Government. On his first day in office, the President froze salaries for all senior political appointees at the White House. Starting in 2011, the President proposed and the Congress enacted a two year pay freeze for all civilian Federal workers, which is expected to save more than $60 billion over the next 10 years. And in 2013 and again in 2014, the President is proposing to freeze the pay for senior political officials. However, a permanent pay freeze for the remaining civilian employees is neither sustainable nor desirable. In light of the fiscal constraints we are under, the Budget proposes a one-percent increase in civilian pay for 2014. Compared to the baseline, this slight increase in civilian pay would free up $1 billion in 2014 and $18 billion over 10 years to fund programs and services and is one of the measures the Administration proposes to help meet the discretionary caps.

The budget notes that Congress created the Revised Annuity Employee retirement plan for federal employees hired after January 1, 2013. This change requires these employees to contribute 3.1% of their pay toward their retirement plans.

Following on the heels of this change, the budget recommends increasing retirement contributions of federal workers hired prior to 2013 by 1.2% over three years starting in 2014. The budget also proposes eliminating the FERS Annuity Supplement for new employees. This proposal is estimated to save $20 billion over 10 years. The budget proposal states that these changes are expected to neither negatively impact on the Administration’s ability to manage its human resources, nor inhibit the Government’s ability to serve the American people.

As we noted in a previous article, the budget also proposes switching to the chained CPI which has the potential to impact retirees. For more on this, see The “Chained CPI” and Your Federal Retirement Package. The budget proposal states that switching to the chained CPI will reduce deficits by at least $230 billion over the next 10 years.

The budget also proposes reforms to aid the Postal Service which has been struggling financially. However, it doesn’t offer any significant details of what these reforms would entail. It states:

The Budget includes a comprehensive and balanced legislative proposal to provide short-term financial relief and longer term reforms to the financially strapped Postal Service. It includes flexibilities that will allow the Postal Service to realign its business plan to better compete in the changing marketplace of increasingly digital communication, including provisions that enable the agency to reduce its costs and increase its revenues. These reforms will result in savings of more than $20 billion over 10 years, and build on the Postal Service’s ongoing initiatives to implement operating efficiencies and business solutions to return it to sustainability.

Federal employee groups were quick to express discontent with the budget proposal.

“For the third year in a row, the President’s budget blueprint disproportionately takes aim at federal employees in an effort to balance the budget,” commented Joseph A. Beaudoin, President of the National Active and Retired Federal Employees Association (NARFE). “Federal employees who are currently enduring a three-year pay freeze have already sacrificed $114 billion from their pocketbooks for U.S. budget savings over the next decade. Enough is enough!”

AFGE national president J. David Cox, Sr. lamented past cuts from the pay freeze and higher retirement contributions and called the budget proposal a “betrayal,” saying, “And now, a final act of betrayal. The White House proposes a fiscal 2014 budget with $35 billion MORE in retirement system cuts, accelerating the race to the bottom for federal workers and their families.”

© 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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