When the House budget committee released its 2016 budget proposal last week, it provided no specifics as to how it would require federal employees to contribute more towards their retirement programs. Rather, it alluded to the recommendations from the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles).
I wrote in an article last week, “Despite the GOP budget offering no details on what increased retirement contributions for federal employees might look like, since it references the Deficit Commission, one can assume the changes to federal employees’ retirement being suggested would be along the lines of what this commission proposed.”
We now have some specifics on what the House budget is proposing with respect to the federal workforce thanks to a new report that recently came out (see the report, Concurrent Resolution On The Budget— Fiscal Year 2016, included at the end of this post), and indeed, there are echoes of the Simpson-Bowles recommendations.
One proposal would lower the interest rate that investors in the TSP’s G Fund would earn. For more on this, see Ralph’s article, Will a New Budget Cut G Fund Interest Rates?.
Here are some of the specifics pertinent to federal employees taken from this new report:
Limit Federal Employee Health Benefit Growth for Retired Members of Congress and Their Staffs and Base Retirement Benefits on Length of Service
Currently, Federal contributions to the Federal Employees Health Benefits Program grow by the average weighted rate of change in these programs. This budget supports restricting the growth in these plans to inflation for retirees. This proposal assumes direct spending savings of $21.7 billion for adopting a policy like this. The budget also proposes basing Federal employee retirees’ health benefits on length of service. (emphasis added) This option would reduce premium subsidies for retirees who had relatively short Federal careers and result in $1.2 billion in savings.
Federal Employee Attrition
The budget includes discretionary savings by assuming a 10-percent reduction in certain agencies of the Federal civilian workforce through attrition, whereby the administration would be permitted to hire one employee for every three who leave government service. National-security positions would be subject to exemption. This could save up to $59 billion over 10 years.
Reform Civil Service Pensions
The policy described in the Income Security section of this report would increase the share of Federal retirement benefits funded by the employee. This policy has the effect of reducing the personnel costs for the employing agency. The budget assumes savings from a reduction in agency appropriations associated with the reduction in payments that agencies make into the Civil Service Retirement and Disability Fund for Federal employee retirement.
Reforming the Postal Service
The budget recommends giving the Postal Service the flexibility that any business needs to respond to changing market conditions, including declining mail volume, which is down more than 25 percent since 2006. Examples of the flexibility that should be considered have been included in several reform proposals approved by the House Committee on Oversight and Government Reform and by the administration, including calls to modify both the frequency and type of mail delivery. The budget also recognizes the need to reform compensation of postal employees who currently pay a smaller share of the costs of their health and life insurance premiums than do other Federal employees. Taken together, these reforms are estimated to save more than $40 billion over 10 years and would help restore the Postal Service’s solvency.
To get a refresher on what the Simpson-Bowles commission’s original recommendations were as they relate to federal workers, see Commission Proposes “High-Three” to “High-Five” for Retirement, Pay Freeze and Changes to FEHB for Federal Employees.