Non-binding budget plan omits retirement contribution hike

Republican leaders in the House and Senate passed a compromise bill that seeks significant cuts to agency operating budgets, while boosting Defense spending. Ab...

At first, many federal employees may have breathed a sigh of relief Thursday, when the Republican-led House passed a compromise GOP budget for Fiscal Year 2016.

After all, the non-binding plan didn’t contain the provision introduced in the House budget plan last March that called for increased contributions for all federal employees to their retirement plans. That’s a good thing, right?

The optimal word is “non-binding”.

The plan, which GOP leaders in the House and Senate hammered out from their separate budget proposals, is more of a guiding document rather than a final, congressional budget. Although the Senate will vote on the compromise plan next week, both chambers still have to go through the appropriations process where a lot can happen.

“It’s significant in that the resolve is there, the majority has put their cards on the table,” said Greg Stanford, government affairs director of the Federal Managers Association. “It’s not all theoretical and hypothetical. There’s agreement out there, so it’s a little more real. That said, the President isn’t going to rubber-stamp anything. [Sen.] Chuck Schumer (D-N.Y.) said the Senate Democrats would stand firm on any appropriations bill that reflects sequestration, so there are huge fights to come.”

The GOP’s joint budget plan aims to cut overall spending by $5 trillion and balance the federal budget in nine years. At the same time, it seeks to offset an increase in Defense spending by repealing the Affordable Care Act and cut agency operating budgets further than sequestration requires — about $500 billion over 10 years.

The main concern many federal employees had when the House released its budget in March was the increase to federal employees’ retirement contributions.

Currently, anyone hired before 2013 contributes 0.8 percent to the Federal Employees Retirement System. Federal employees hired in 2013 contribute 3.1 percent to their defined benefit pension. Employees hired in 2014 are required to contribute 4.4 percent. Under the original budget proposal in March, all federal employees would pay 6.6 percent.

Stanford said he was still anxious about the possibility of the contribution increase reappearing in the final budget.

“Purely from standpoint of, ‘Hey, this is a lot of money the government could save,’ I get why they look to it but obviously FMA and other employee groups have said many times and will continue to stress that federal employees have done their fair share,” he said.

Jason Briefel, the director of government affairs at Shaw Bransford Roth, said the joint resolution is a much broader document than the House resolution, which gave specific suggestions in how committees could find savings in programs.

One suggestion, for example, targeted the Thrift Saving Plan’s G Fund.

“Securities within the G Fund are not subject to risk of default,” the House budget report said. “Payment of principal and interest is guaranteed by the U.S. government. Yet the interest rate paid is equivalent to a long-term bond. As a result, those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security.”

Just like the proposed retirement contribution increase, the joint plan doesn’t mention the G Fund as a target. Any reforms Senate or House committees embark on to improve or update the federal retirement system would have to be deficit-neutral — the changes could not increase the deficit for FY 2016 through 2025.

Federal News Radio reporter Emily Kopp contributed to the reporting of this story.


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