Will Changes to Federal Employee Benefits Provide a Financial Windfall (or Disaster)? The Joy and Pain of the Rumor Mill

Real proposed changes to federal employee pay and benefits always lead to rumors about how some will benefit and some will be harmed. The internet gives rumors a credible life of their own. Here are some of the latest rumors and the often less dramatic reality.

There has been plenty of bad news in recent weeks and months regarding federal pay and benefits. A proposal by President Obama to freeze federal pay for two years was enacted relatively quickly by the former Congress and there are proposals floating around to change the federal retirement system by using a formula of an employee’s “high five” earning years instead of the “high three” earning years. The result would most likely be a reduction in your future retirement annuity. (See Your Financial Future: Your Federal Employee Benefits and the Deficit Commission Recommendations and High Five vs. High Three: Is There a Difference In Your Retirement Annuity?)

And, as we have dutifully reported on our website, there are several proposals for cutting the federal workforce in one way or another. (See Commission Proposes “High-Three” to “High-Five” for Retirement, Pay Freeze and Changes to FEHB for Federal Employees)

Human nature being what it is, rumors inevitably start flying, even before the first word has been typed into a Congressional committee’s computer program. Before the internet, people would get on the telephone and tell one friend about the latest “news” and that friend would then contact others with a rumor that quickly morphed into a well-known “fact.”

The difference today is that a rumor can be sent out to large groups of people with one short email.

The numerous proposed changes are confusing. The confusion quickly leads to more rumors which, by the second or third iteration become an established “fact” even if the rumor is not true.

Rumor Number One 

Here is an example. We received several emails in the past couple of days about changes to federal pay and benefits. This is one of the emails that is similar to several others that we received:

“unfortunately (or maybe accurately) our local afge is confirming with staff that the high-5 recommendation and retirement age increase has quietly passed through congress and is awaiting president obama’s signature.”

We try to follow pending legislation and were skeptical that something that this noteworthy  for our readers would somehow have slipped through the legislative process without anyone knowing about it and making it known to the public.

And, in fact, it isn’t true. A knowledgeable source working on Capitol Hill quickly rebuffed the suggestion that this change had gone through Congress and was now sitting on the President’s desk. “It doesn’t work that way,” he said. He noted that this change would have likely gone from a sub-committee and then reviewed and reported by a committee and sent to the floor for a vote. From there, it would have gone to the Senate for a vote and would have to be approved before being sent to the President. All of this would have been reported in short order.

The current Congress is still setting up its committees. While the change from a “high three” to a “high five”  may be passed in Congress at some point, it has not happened and, if it does become enshrined in future legislation, it is not likely to be a stealth program that escapes public notice. Presumably, those strongly supporting such a measure will want to be recognized for their actions and take credit for cutting government spending and will be issuing press releases to discuss their concern for the American taxpayer.  Even if elected officials do not jump into full “photo op” mode, the legislation will be posted and available for us to read before it goes to the President for signature. 

Rumor Number Two

Another rumor that is circulating is actually a “golden oldie” that initially surfaced under the Clinton administration. We received several notes from readers similar to this one (although this one actually has a few more details than some of the others). As this is the internet age, and grammar and punctuation may only be a remnant of a past, pre-electronic era, here is one of the notes as it was received (with a minor modification indicated so it will be intelligible to readers):

“a co-worker that has friends on the hill advised me yesterday that a think tank (for a commitee) is proposing an offer (buy-out) unlike ones in the past. the plan would offer 5 years of credible service onto the employees total employment with no $ going out at the time of separation. granting 100% credit in dollars for both (annual leave and sick leave).” 

In other words, an unknown think tank is reportedly making a suggestion to an unknown committee about a possible buy-out for federal employees that would conveivably enrich some federal employees who are anxious to retire.

It is, of course, possible that such a proposal has been quietly made within the environs of Capitol Hill. The beauty of a rumor like this one is that since most of the details about the origin and the organizations that may be involved are unknown (but with specifics about how some people will benefit), it is impossible to completely refute it.  

The rumor that surfaced during the Clinton administration did not turn out to be true. There were buy-outs for some federal employees and some of these folks received a financial benefit, although the benefits were not as lucrative as many had hoped or as generous as the rumors had suggested. It is possible that the rumor circulating at that time may have had some truth in that a range of possibilities were considered by lawmakers and those working for elected officials. 

Our Capitol Hill source discounted this rumor as well and noted that it is too early to know what will emerge on this issue. While some group may be suggesting it to a Capitol Hill staff member, it has not emerged as a possibility that is being seriously discussed other than through the rumor mill.

No doubt, there will be proposed changes to federal benefits and we have made our readers aware of these concrete proposals as they emerge. Various changes will be discussed in the legislative process. Rumor are fun and interesting and may even have at least a germ of truth to them.

Don’t believe everything your hear or read and certainly don’t make an financial decision based on the possibilities envisioned by an unsubstantiated rumor. Whether a rumor reaches you by email or directly to your ear from a friend’s statement to you in a local watering hole, a rumor is just a rumor.


About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47