The Senate Committee on Homeland Security and Governmental Affairs (HSGAC) has released legislative text to be considered as part of the budget reconciliation bill working its way through Congress, also known as the One Big Beautiful Bill Act. Some of these proposals would have a dramatic impact on federal employees’ benefits.
The following is a summary of the proposals published by HSGAC. Collectively, the proposals are estimated to save over $24 billion over the next 10 years.
Election for At-Will Employment and Lower Federal Employee Retirement System (FERS) Contribution for New Federal Civil Service Hires
This proposal would require newly hired federal employees to choose between serving at-will or retaining their current Title 5 protections. New hires who choose to retain current Title 5 protections will face a 10-percentage point increase in their FERS contribution rates (14.4% total for most federal employees).
Conversely, a new hire who chooses to serve at-will, thereby forgoing the protections afforded to current federal employees, will only be subject to a 5-percentage point increase in FERS contributions.
It is estimated that this proposal would generate $20 billion in savings over the next 10 years.
This proposal expands on the one that originally came out of the House Oversight Committee back in April. That proposal increased the FERS contribution rate by just 5% for new hires (9.4% total for most federal employees) who opted to retain civil service protections.
As to the reasoning behind the proposal, the HSGAC writes:
For years, federal employees have benefitted from perks and protections unattainable for the vast majority of the American workforce working in the private sector. Not only do these employees benefit from a protected status, but federal employees now have enshrined protections preventing new Administrations or agency heads from firing them except for in certain extreme circumstances. This has created a bureaucratic state where certain federal employees lack any incentive to perform and face no recourse for a lack of performance. To make matters worse, the Federal Employee Retirement System (FERS), which provides retirement benefits way beyond what the private sector typically offers, lacks solvency and costs more to administer than what federal employees are required to contribute.
Filing Fee for MSPB Claims and Appeals
Just like the House version of the legislation, the HSGAC legislative text contains the $350 filing fee for Merit Systems Protection Board (MSPB) claims and appeals. The fee would be reimbursed for successful appeals. The fee is the same as the one charged for filing for civil matters in district courts.
The purpose of this proposal is to disincentivize “baseless claims” from being filed with the MSPB.
FEHB Audits
This also is a proposal carried over from the House version of the legislation. It would require the implementation of a process to verify the eligibility of family members added to Federal Employees Health Benefits (FEHB) plans upon enrollment, impose an audit on the FEHB program for ineligible family members receiving benefits, and require the disenrollment of any ineligible beneficiaries.
It is estimated this would generate $2 billion in savings.
Deductions from the Pay of Federal Employees
This is a proposal that is not found in the House version of the bill. It would impose a 10% fee to cover administrative costs for any optional payroll deductions made by federal employees to certain tax-exempt organizations, such as unions. Contributions from employees to organizations via methods that don’t require government resources, such as writing a check or transferring money via ACH, would not be affected.
The proposal notes that the government currently incurs costs to establish and facilitate payroll deductions for federal employees so it should at least break even on those costs.
Bonuses for Cost Cutters
This has been introduced as separate legislation in the past by Senator Rand Paul (R-KY), who is also the HSGAC Chairman.
HSGAC notes in its proposal that federal government expenditures tend to rise substantially at the end of each fiscal year due to the perverse incentives inherent in the government’s budgeting process. Agencies have adopted a “use it or lose it” mentality, leading to excessive spending on wasteful or unnecessary expenditures.
This initiative aims to address this issue by establishing a fund to reimburse agency Inspectors General (IGs) for cash bonuses awarded to federal employees who identify surplus salaries and expenses certified by the agency IG as unnecessary. Instead of aggressively spending funds to justify larger appropriations, federal employees would have a financial incentive to flag these funds and be rewarded for doing so.
As written, bonuses that would be paid to federal employees by this provision would be the lesser of:
- $10,000; or
- an amount equal to 1 percent of the agency’s cost savings determined to be the total savings attributable to the disclosure or identification by the employee.
Charging Labor Organizations for the Use of Federal Resources
This provision would ban federal employee unions’ use of official time and government resources for union activities.
Federal union representatives can currently utilize official working hours (official time) and government resources for union activities. However, this provision mandates that unions reimburse the government when official time and resources are used for union activities “instead of the work these representatives were hired to do for the American people.”
Rescinding Postal Service’s EV Funds
This provision would rescind over $1 billion in funds given to the USPS by the Biden administration for purchasing and installing electric vehicles (EV) and infrastructure under the Inflation Reduction Act. The Postal Service would also be directed to sell these remaining EVs and unused infrastructure.
Predictably, federal employee unions are not happy about the proposals and are urging lawmakers to vote against them. AFGE National President Everett Kelley said in a statement, “This so-called reconciliation bill is in fact a big retaliation bill – retaliation against AFGE and other unions for successfully standing up for our members and fighting this administration’s illegal attempts to obliterate our federal agencies and the patriotic civil servants who run our federal programs.”
NARFE National President William Shackelford said, “This bill would provide the president with nearly carte-blanche authority to reorganize – and potentially dismantle – the entire federal government with the consent of Congress. Such language would represent a massive abrogation of congressional power to the executive branch.”
Comparison With House Proposals
These proposals from the Senate build on the version of the One Big Beautiful Bill Act (H.R. 1) that passed the House last month.
These are the provisions that are the same or similar in the House and Senate proposals:
- At-will employment option
- MSPB filing fee
- FEHB audits
The Senate proposal expands on the at-will employment option as noted above compared to what was in the version of the bill that passed in the House.
There is one proposal in the House version of the legislation that is different, and that is the elimination of the FERS annuity supplement.
The Senate proposals that are different from the House version are the pay deductions, bonuses for cost cutters, charging fees to unions, and eliminating the EV funds for USPS.
FedSmith will continue to provide updates on the status of these and other legislative proposals impacting federal employees as the legislation continues to be debated in Congress.
