Rewarding High Performers and Chopping Benefits

February 20, 2020 1:42 PM , Updated March 13, 2020 10:56 AM
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FedSmith recently published an article on proposed White House budget changes that would impact federal employee pay and benefits if enacted. The Office of Personnel Management (OPM) has followed up on the budget proposal with its legislative agenda tracking the budget proposals and adding substance by outlining some details on how the proposed changes would work.

The proposed changes that would have the most impact on the workforce are designed to award the highest performing federal employees, restrict benefits to employees that do not perform at the highest levels, and to bring current federal employee benefits more in line with private-sector benefits.

Proposed Changes to Retirement Benefits

One proposal seeks to increase money from federal employees going to the Civil Service Retirement and Disability Fund (CSRDF). Other proposals would reduce the cost to the federal government by reducing the cost of annuity payments.

Increase Contributions to FERS

One proposal is increasing federal employee contributions to the Federal Employees Retirement System (FERS) so that an employee would pay half of the normal cost. Currently, most Federal employees contribute between 0.8 percent and 4.4 percent of their salary toward their future pension. 

This proposal will be phased in over several years. Employees under FERS would contribute an additional one percent of their salary each year until contributions from the government and the employee are equal.

Change COLA Calculations and High-3 to High-5

The remaining proposals implement changes to FERS and the Civil Service Retirement System (CSRS).

  • One proposal would eliminate the cost of living adjustments (COLA) for FERS retirees and would reduce the CSRS retiree COLA by 0.5 percent.
  • The proposals would eliminate the FERS Annuity Supplement for employees retiring before the Social Security eligibility age. They would also change annuity calculations using an employee’s highest five consecutive salary years instead of the current average of an employee’s three highest salary years.

Modernizing the Civil Service System

A proposal that would benefit some federal employees is expanding the authority to create “critical pay” positions. This proposal would allow OPM to grant critical pay up to the rate for the Vice President ($246,900 in 2019). It would also expand the total number of positions that may be approved for critical pay from 800 to 2,000.

Another proposal would allow the OPM Director to authorize agencies to pay a special incentive to employees with high-demand or shortage skills that serve a critical need. This would add up to 25 percent of basic pay. The proposal would also allow OPM to designate high-demand or shortage skills that serve a critical need.

Slowing Down Routine Step Increases & Rewarding High Performers

Another legislative proposal would add one year to each GS within-grade increase waiting period resulting in a waiting period of two years (instead of one year) for progressing to steps 2, 3, and 4; three years (instead of two years) for progressing to steps 5, 6, and 7; and four years (instead of three years) for progressing to steps 8, 9, and 10.

The proposal would also eliminate the right of appealing denial of a within-grade increase to the Merit Systems Protection Board (MSPB).

To stress and reward high-quality performance rather than just seniority, the proposal would maintain the current standard that a GS employee be performing at an acceptable level to advance to steps 2, 3, 4, 5, 6, or 7s. But, to advance to steps 8, 9, or 10, an employee’s performance would have to be rated above the Fully Successful level.

To see the impact of the steps on an employee’s pay, check out the GS pay calculator.

Another nod to rewarding the highest performing federal employees is to eliminate the credit for a within-grade increase during a waiting period when an employee is on a performance improvement plan because of unacceptable performance.

More Cash Inventive Awards

Another change to reward the highest performing federal employees is to provide greater flexibility for agencies to award cash incentives. It would raise the current caps/thresholds on awards requiring OPM or presidential approval. The cap for awards requiring OPM approval would increase from $10,000 to $25,000, and the cap requiring presidential approval would increase from $25,000 to $50,000.

These caps would also be subject to automatic annual adjustment in accordance with the Consumer Price Index. 

Changing Contributions to the FEHB

Currently, the government’s contribution to a health plan option is the lesser of 72 percent of the weighted average premium of all health plans or 75 percent of that plan option’s individual premium. Under this proposal, FEHB plans will be divided into two groups representing higher-performing plans and all other plans.

The base government contribution would be established as 71 percent of the weighted average of all plan premiums up to 75 percent of an individual plan’s premium. But, for higher-performing plans, the government’s contribution would be raised by 5 percent, up to a maximum of 80 percent of the plan’s premium. Health plans not categorized in the high-performing group would receive the base contribution amount.

OPM estimates this proposal would result in a savings of about 1.1 percent of the government share of the premium for annuitants and non-Postal employees, who constitute nearly 90 percent of those enrolled in FEHB. 

This proposal aligns with OPM’s strategic goal to improve healthcare quality and affordability in the FEHB Program with 75 percent of people enrolled in quality, affordable plans.

Union Contracts and Government-Wide Regulations

Another proposal would eliminate the current requirement to prevent implementing any rule or regulation that conflicts with a “collective bargaining agreement if that agreement was in effect before the date the rule or regulation was prescribed.”

This proposed change is directed at the controversy regarding several Executive Orders issued by President Trump that would impact the federal workforce by changing procedures to make it easier to fire a federal employee and creating new restrictions on giving federal employees time away from their federal job to represent a federal employee union.

Federal unions are trying to delay the implementation of the orders in the courts and other administrative procedures. The delays are largely possible as a result of the current requirement that government-wide rules and regulations are delayed when conflicting with a labor contract.

This legislative proposal would change the current requirement and allow implementing new policies and procedures more quickly.

© 2020 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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