G Fund Rate Cuts and a Possible Government Shutdown: NARFE Discusses Priorities for the New Session

By on September 8, 2015 in Retirement with 37 Comments

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With Congress back in session this week, John Hatton, deputy legislative director for the National Active and Retired Federal Employees Association, told FedSmith.com that the next few months are Congress’s last chance to pass meaningful legislation before entering the 2016 Presidential election year, when the opportunity for making hard choices becomes less likely.

First on NARFE’s priority list is passage of legislation needed to keep government agencies operating. With the two-year old Bipartisan Budget Act of 2013 expiring on Sept. 30, Congress will need to approve 12 appropriations bills, an omnibus spending bill, or a stop-gap continuing resolution to continue funding federal agencies into the new fiscal year. If none of these three alternatives occur by Sept. 30, the government will shut down for the fifth time since 1990.

Other legislative priorities include the Highway Trust Fund and raising the ceiling on the national debt.

In July, Congress passed a three-month stop-gap plan for the Highway Trust Fund and lawmakers have until Oct. 29 to find money to keep the fund running. One source considered in July was cutting the rate of interest paid on TSP’s G Fund.

As Ian Smith wrote back then, the stop-gap measure “leaves the G Fund untouched, but it will largely depend on what action the Senate takes on a long term funding measure as to whether federal employees will ultimately have to worry about the proposal.”

In August, the Congressional Budget Office issued a warning that the government is now approaching its legislative limit on borrowing. Last March, Congress reset the debt limit to the amount of debt outstanding as of March 16 ($18.113 trillion) but did not raise the ceiling. CBO estimates that with usual cash inflows as well as extraordinary measures such as “disinvesting” in the TSP’s G Fund, the Treasury can “continue borrowing and have sufficient cash to make its usual payments through mid-November or early December without an increase in the debt limit. Earlier or later dates are possible, depending on the amount and timing of cash flows in the next few months.” Whenever that date occurs, the extraordinary measures will be exhausted, and the Treasury will have insufficient funds to finance government operations unless the debt ceiling is raised.

NARFE is also concerned about talk that Congress may increase retirement contributions from new and current federal employees to partially offset the cost of other budget items.

The association’s second priority is correcting the possible 52% increase in Medicare Part B premiums due to go into effect in January for non-Social Security recipients, including for most CSRS retirees.

“This [Medicare Part B premium] increase is an untended consequence of the law that will result in individuals with similar incomes having different outcomes without any arguable policy basis,” said Mr. Hatton.

NARFE believes that the Medicare statute does not require the Administration to take into account the lost premium income resulting from the hold harmless provision to effect the calculation of the monthly actuarial rate, and consequently, the standard monthly premium. It is urging the Administration to reevaluate its stance on this issue.

So far, NARFE has received mixed signals from Capitol Hill about possible legislative action. With current budget constraints, Congress will likely demand a budget-neutral solution to extending the effect of the hold harmless provision – no premium increase – to those for whom the hold harmless provision does not apply. Otherwise if there is no Social Security COLA for 2016, the 52% increase will go into effect come January.

Third on the priority list is responding to more suggestions for postal reform. Congress continues to consider plans that would pare down door-to-door and Saturday service, close more post offices and processing plants, and eliminate postal routes; thus threatening USPS’s unique, universal service network.

To achieve its priorities, NARFE is working to keep communications open between groups affected by these changes as well as encouraging its members to stay motivated and politically active.

“We find that current federal employees sometimes misunderstand their rights under the Hatch Act and incorrectly feel they cannot speak out on issues affecting them. But there is nothing wrong with picking up the phone to tell your elected representative to oppose a change to the G Fund or a government shutdown,” said Mr. Hatton. “For federal retirees no longer covered by any political restrictions, it is a golden moment for them to get involved in political campaigns.”

© 2016 Michael Wald. All rights reserved. This article may not be reproduced without express written consent from Michael Wald.

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Michael Wald is an independent economics analyst and writer based in the Atlanta area. He specializes in topics related to business, labor, and human resources. Prior to his retirement from the U.S. Department of Labor, he served as the agency’s Southeast Regional Director of Public Affairs and Southeast Regional Economist.

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