Breaking the Bank: Washington’s Attack on Your Retirement Security and What You Can Do to Stop ItThursday, July 7, 2011
(National Federation of Federal Employees)
“The federal retirement system we have today is secure. If you work hard for twenty, thirty, or forty years, you can earn enough to rely on. But it seems like members of Congress are forgetting about federal employees; they’re forgetting about the little guys who are doing the work of the American people every day. If they try to take away our pensions or make big cuts to our benefits, a lot of people will find it hard to get by.”
Rigley Jackson, President of NFFE Local 1887, said what has been on the minds of hundreds of thousands of federal employees who are planning to retire in the coming years. As it stands today, the federal retirement system is based solidly on the three-legged stool of the Federal Employee Retirement System (FERS) pension, the Thrift Savings Plan (TSP), and Social Security. Combined, the three legs of the stool create something that is much more than the sum of its parts – a secure retirement.
However, recent debates playing out on Capitol Hill and in the media suggest that the three-legged stool of federal retirement is about to get very, very wobbly. As our elected officials search for ways to trim the nation’s long-term debt, it appears that lawmakers will return to a familiar source to find the savings they need: the federal worker. Led by the new Republican majority in the U.S. House of Representatives, scores of proposals to trim federal retirement benefits have been put forth in the past six months.
At the end of last year, the President’s National Commission on Fiscal Responsibility and Reform issued their highly anticipated report containing recommendations for reducing the nation’s debt burden. One recommendation advocated moving from a “high 3” annuity calculation to a “high 5” system. This “high 5” figure refers to the average pay earned over the five most highly paid years of government service. The net impact of this change would be a lower average salary figure when computing the value of your retirement annuity.
Here’s how: In most cases, when the government calculates your annuity, it takes your “high 3” average salary figure, multiplies it by your years of service, then multiplies it by either 0.1 (FERS employees) or 0.2 (CSRS employees). The resulting figure represents your annual retirement annuity. By changing the average salary figure from “high 3” to “high 5,” this amount is lowered, resulting in a smaller annuity payment for the rest of your life. This proposal has yet to be formally introduced, making the risk of passage in the near future on the lower end of the scale. Nonetheless, there are many more proposals that have been introduced that look to take things a step further.
Another proposal, introduced by Senators Richard Burr (R-NC) and Tom Coburn (R-OK) in March, seeks to eliminate federal pensions all together. Starting in 2013, the deceptively named Public-Private Employee Retirement Parity Act, S. 644, would eliminate the pension portion of FERS for all new government hires. Instead, workers would receive only the TSP portion of FERS in addition to their Social Security.
According to Sen. Burr, your retirement benefits are excessive. Unfortunately for the Senator, the facts tell a much different tale. When examined closely, it becomes clear that this bill has little to do with cost and much more to do with unfairly targeting federal employees. The truth is that federal workers’ pensions represent only a modest portion of the larger federal retirement picture. For example, a career federal employee who retires with a final salary of $50,000 per year and 30 years of service will receive a pension of merely $15,000 per year – hardly the stuff of which millionaires are made.
Though the vast majority of federal retirement plans are demonstrably modest, it appears that calls to scale back benefits are gaining traction even outside of the Republican House. In late May, details began to emerge from White House and congressional negotiators with regards to the shape of a long-term deficit reduction plan; a plan that will coincide with the raising of the national debt ceiling. After weeks of negotiations, it appears that lawmakers are ready to accept yet another trip to the federal employee well for cutbacks.
Administration officials have reportedly agreed to Republican demands for federal workers to contribute more to their pensions. Though a definitive number has yet to be chosen, Republican negotiators are pressing for FERS employees to contribute a full six percent of their salary toward their pensions – more than seven times the 0.8 percent they contribute today. If the full six percent pension contribution is enacted, federal workers would see their pay automatically reduced by five percent. Coming on the heels of a two-year pay freeze, this proposal would serve as a de facto extension of the wildly unpopular policy.
“Instead of making any serious effort to address the deficit, Washington politicians have decided to take a second drink at the federal employees’ well,” said NFFE National President William R. Dougan. “Federal workers have already accepted a serious pay reduction, and now our elected officials are asking for five percent more. Where does it stop?”
The result of the aforementioned proposals would be to destroy federal retirement security and severely hamstring the government’s efforts to recruit the next generation of federal workers. With a retirement wave expected to hit the workforce in the coming years, slashing retirement benefits today will make it much more difficult to recruit doctors, intelligence analysts, scientists, and other highly sought after workers into the federal service. Even more, it will de-value the service of the hard working federal employees that make America the greatest nation in the world.
NFFE remains starkly opposed to any proposal that would reduce federal employees’ retirement security, a position that we and our fellow Unions have expressed to Congress and the Administration countless times. NFFE and our allies will continue to oppose legislation that unfairly targets the retirement security that federal employees have earned through years of dedicated public service, but we can’t do it alone.
Visit the NFFE Legislative Action Center to see how you can get involved in the fight. There, you can find letters, position papers, talking points, and contact information for elected officials. With these tools, you can make your voice heard in Washington. If we all do our part, we can stop the attacks on our retirement security.