Federal Employee Pay Freeze for 2019?

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By on October 24, 2017 in Pay & Benefits with 0 Comments

Piggy bank sitting in a pool of water surrounded by chunks of ice

Proposals outlined in a leaked White House policy council budget document contains a section on federal employee pay and benefits that reflects earlier proposals in a Heritage Foundation Blueprint for Reform.

The document was released by a website called Crooked. Government Executive referred to the website as a “liberal news site”. That may be a compliment with faint praise as the site appears to to be an extreme anti-Trump blog.

In any event, the document is purportedly a leaked copy of a White House policy council document as part of preparing the 2019 federal budget request. It appears legitimate and possibly leaked by a “deep state” representative with access to sensitive items to a website vehemently opposed to the Trump administration which seems to occur with some frequency. Attachments to the document which reportedly “outlines these reforms in detail” with regard to changes for federal employee pay and benefits were not included.

Insofar as the proposals impact federal employee pay and benefits, the proposals are consistent with proposals which FedSmith has outlined in previous articles. (See Worst Case Scenario: Proposed Cuts to Federal Pay and Benefits)

Here is a quick summary.

Federal Employee Pay Freeze?

The most important item in the document, insofar as federal employee pay and benefits are concerned, is a proposal to implement a pay freeze in 2019. Note that this refers to 2019. For 2018, a pay raise with an average of 1.9% increase is on track to become effective in January.

According to the document, a federal pay freeze for 2019 is the most important proposal and “the only one we can do unilaterally.” While a new pay freeze, similar to the one imposed during the Obama administration, would likely have the most significant impact on the federal workforce, the comment in the document that it can be done unilaterally is not necessarily the case. While Congress may choose not to become involved in determining the amount of any pay freeze for 2019, Congress does have the option to become involved.

In the past few years, Congress has accepted the president’s alternative pay proposal. That could, of course, happen again for 2019 which would result in a unilateral decision on the pay freeze.

Additional Proposed Changes to Federal Benefits

Here is a listing of the other proposed changes for federal employee pay and benefits in the new document for the 2019 budget proposal. These are a direct quote from the document.

  • Slow the pace of seniority-based pay increases by 50 percent.
  • Eliminate FERS defined benefit retirement plan for new hires.
  • Enact all the FERS reforms for existing hires included in the FY 2018 budget.
  • Eliminate retiree health benefits for new hires.
  • Eliminate the mandatory 25 percent employee co-pay for federal health benefits¨ to encourage greater competition between FEHBP plans and reduce costs.
  • Bring Federal paid leave benefits in line with private sector norms.

Likely Content of Proposed Changes

The following is a summary of changes likely to be proposed for the 2019 budget. These proposals are from the Heritage Foundation’s Blueprint for Reform to the federal civil service. These are not all of the proposed changes. These several proposals are on the same topic as those purportedly to be included in the 2019 budget proposals.

Possible Proposed Changes to FERS

Private-sector employers with retirement plans usually contribute between 3 percent and 5 percent of employees’ salaries to their retirement plan. The federal government contributes up to 18 percent of employees’ pay toward both the government’s defined benefit pension (FERS) and its defined contribution plan (TSP). (See Federal Government Contributes Up to 18% of Employees’ Pay? for a more detailed explanation.)

The Heritage Foundation has previously proposed a transition period for federal employees into a different retirement system. The transition would grandfather employees with 25 or more years of federal service, allow employees with between five and 24 years several options, and create a new system for new hires and employees with fewer than five years of service.

Federal employees with less than five years of service would no longer receive FERS contributions. They would receive a lump sum benefit equal to the contributions they have made to FERS and would receive an additional 3 percent in automatic TSP contributions.

FEHB Changes for Retirees

With a minimum retirement age of 57, federal employees can leave federal service and collect health and pension benefits while working for a company in the private sector. The Heritage proposal was to eliminate the government subsidy for retiree health benefits for new federal employees who are hired. Continued access to the federal health insurance plan could continue into retirement but employees would have to pay the full cost of the insurance premiums.

Possible Proposals to Federal Leave Program

The Heritage Foundation’s Blueprint for Reform contained proposed changes to the federal leave program. Here is a quick summary:

  • Combine vacation and sick leave into one plan. This would result in 16 days for workers with fewer than three years of service and up to 27 days for federal employees who have worked longer time periods.
  • Alternatively, maintain separate vacation and sick leave accounts but restrict the total leave available. Reduce current vacation allowance from 13 days, 20 days, or 26 days (depending on years of service) to 10 days, 15 days, and 20 days. Reduce sick leave days from 13 days to 10 with the ability to roll sick leave over from year to year.

Changes to Within-Grade Increases

These proposals would require Congress to take action to make the changes. Based on past experience, that will be difficult to achieve.

Heritage previously proposed eliminating the virtually automatic Within Grade Increases (WIGIs) of about 3 percent to about 2 percent. This would reduce the differential of about 30 percent between steps 1 – 10 of each grade to about 20 percent.

Another proposal was to remove the automatic awarding of WIGIs. One way is to make it easier for federal managers not to award these increases to all employees. The rationale for this is that the GS pay scale usually includes annual increases to account for changes in the cost of living. A within-grade increase represents performance-based increases for more experienced federal employees. Heritage notes that “with more than 99.9 percent of all federal employees receiving WIGIs each year, it is hard to argue that they are anything but simply automatic increases.”

The report encouraged Congress to limit the requirement that managers develop a time-consuming Performance Improvement Plan (PIP) for all employees that do not receive step increases and also the scope of appeals for employees who do not receive step increases to within the agency as opposed to an outside forum.

The Trump White House Policy Wish List

© 2019 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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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

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