r there is news about proposals to reduce or eliminate certain retirement benefits for federal employees, we always receive a lot of questions about the proposals.
This is understandable. The vast majority of our readers are federal employees and many of them are approaching retirement age. They are worried that their current retirement plans will be upended by these proposals.
What’s at Stake
The White House’s budget blueprint suggested eliminating Cost of Living Adjustments (COLAs) for current and future federal retirees under the Federal Employees Retirement System (FERS). For retired federal employees under the Civil Service Retirement System (CSRS), COLAs would be reduced by 0.5%.
The FERS Special Retirement Supplement would be eliminated for those employees who retire before Social Security eligibility age. Also, annuities would be calculated based on a high-5 instead of a high-3 as is done currently.
Additionally, FERS employees would have to contribute more for their portion their retirement (50% of cost), but the proposal would phase it in over several years to mitigate the impact.
These are a high level summary of some of the proposals. For additional details about these and other proposals, see Substantial Cuts to Federal Employee Benefits Proposed in FY 2019 Budget and The Rumor was True: FY 2019 Budget Proposes Pay Freeze.
What Will These Cuts Mean for Me?
As I said at the start of the article, proposals like these pop up periodically and they always lead to lots of questions. These are just a few examples of questions we have recently received from some of our readers:
- I am hoping to retire at the end of next year. If Congress eliminates the FERS annuity supplement will that also eliminate the 1.1% for employees age 62 or older? Or would I be grandfathered in?
- If I am planning on retiring at the end of 2018, how would all of these proposed changes for 2019 affect me? Does the FERS Supplement get taken away if you have already retired?
- I am counting on the high three. Do you think there will be a phased in change or at change for everyone? It would not be fair to implement an across the board change for people who are do close to retirement.
The core theme to all of these questions is, “How would the <particular proposed change> be implemented and affect me in my situation?”
The short answer to all of these questions is this: Nobody knows what, if ANYTHING, is going to happen with these proposals. If or until any specific legislation is passed into law by Congress, it is impossible to know how cuts or changes to retirement programs (assuming any of them are even enacted) will impact any individual employee’s personal situation, whether or not they would be retroactive, only affect future employees, etc.
Consequently, it is not possible to make any specific plans about something that has not yet happened and also that may not ever happen.
In other words, it’s too soon to start worrying. In fact, FedSmith.com author John Grobe wrote an excellent article on this very subject several years ago. Some of his advice: “don’t panic, don’t lose sleep, and be confident that if changes come, there will be ample time to react and make decisions on what you will do.”
Note that the date on that article was from 2014, the point being that proposals like these have been around for a long time and will probably always come and go as power shifts in each Congress as each of the two parties gains a majority and starts espousing their preferred vision for federal spending priorities.
Ok, But What Can I Do?
So it’s much too early to start panicking, and there are no specific answers to how any of these proposals would play out. What, then, can federal employees do in the meantime?
FedSmith.com authors Kelly Monroe, Randy Silvey and John Grobe have addressed this question in some of their recent articles.
Kelly Monroe recently addressed each of the proposals from the White House budget in detail along with her analysis of how much of a likely impact each one, if it were to be enacted, would have on a federal employee’s retirement. No drama or hyperbole, just a hard, factual look at each proposal. It’s worth a read: What’s the Impact of the [PROPOSED] FERS Benefit Cuts?
As I said before, these proposals seem to pop up periodically. The last budget cycle was no different. The White House’s 2018 budget blueprint offered similar proposed benefits cuts.
Other articles we published at that time addressed the situation and still contain prescient advice. Randy Silvey wrote an article in which he provided two general suggestions for federal employees: joining an advocacy group for federal employees and/or take control of the parts of your retirement that you can.
John Grobe also weighed in. He suggested that federal employees take action in various areas of their retirement planning, such as maxing out your TSP, opening an IRA, and cutting expenses in retirement budget planning. He also looked at the pros and cons of federal vs. private sector employment along with benefits when leaving federal service for federal employees who may be thinking of leaving federal service.
What Do FedSmith Readers Think?
Our readers have weighed in with their suggestions as well. Not surprisingly, the topic of cutting pay and benefits for the federal workforce is an emotionally charged subject that leads to lots of comments.
Some of the comments on articles we have published on the subject have made suggestions on how federal employees can best deal with the proposed changes in the meantime. These are a few examples:
Do you have other practical advice for ways to proactively deal with the proposed benefits cuts? Share them in the comments below.