Familiar cuts to federal pay, retirement, health benefits included in Trump’s proposed 2020 budget

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The Trump administration for the third consecutive year is proposing a series of familiar cuts to federal employee pay and retirement and health benefits.

The summary of the president’s proposed 2020 budget, which the White House released Monday, also doesn’t include a pay raise for civilian employees next year.

Specifically, the president is proposing:

  • An increase in federal employee contributions by 1 percent each year,
  • An elimination of the cost-of-living adjustment for current and future Federal Employee Retirement System participants and a 0.5 percent cut to the COLA for Civil Service Retirement System participants of what the typical formula currently allows,
  • Basing future retirement benefits on the average of an employee’s highest five years of salary instead of an employee’s highest three years of salary, and,
  • An elimination of the FERS Special Retirement Supplement, payments for employees who retire before age 62.

In addition, the president has proposed a defined benefit contribution plan for “term” employees, but the initial White House request doesn’t provide much more detail.

The White House estimates modifications to federal employee health and retirement benefits would save the government $5 billion in 2020 — and $102 billion over the next 10 years. It’s a small part of the $2.7 trillion in spending reductions the president has included in his request for the next decade, a record for this administration and any other previous one, the White House said Monday.

The administration is reviving another familiar recommendation: Reducing the interest rate for the Thrift Savings Plan’s G Fund.

Changes to the Federal Employees Health Benefits Program are also back on the table. This time, the White House wants to modify the government contribution to FEHBP premiums so that employees pay more.

Changes to federal employees’ health benefits will save significantly less than the president’s proposed retirement cuts. The government won’t realize savings until 2022 — about $134 million — and will realize about $1.8 billion over the next 10 years.

‘Here we go again’

These proposed cuts to federal employee benefits will be a tough sell in Congress, particularly under a Democratically-controlled House of Representatives. Lawmakers never seriously considered these proposals even during the first two years of the Trump administration.

Some members of Congress, along with federal employee unions, are already pushing back against the president’s proposed pay and retirement cuts.

“It’s particularly galling that, just weeks after the longest government shutdown in history, the President’s proposed budget takes direct aim at the federal workers who bore its brunt by pushing for yet more cuts: Retirement cuts. Benefit cuts. Another pay freeze,” Sen. Mark Warner (D-Va.) said in a statement. “Federal workers are the backbone of a functioning government, and they deserve better than what we’ve seen from this administration.”

The National Treasury Employees Union said it would work with its allies on Capitol Hill to reject the President’s proposed plan.

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“Here we go again with a plan to make frontline federal workers — many of whom just suffered through a record-breaking shutdown — pay down the federal deficit with their pensions,” NTEU National President Tony Reardon said in a statement. “NTEU will strongly oppose these cuts and instead urge Congress to keep its promises to federal employees.”

The President proposed a pay freeze as part of his 2019 budget request, but Congress ultimately included a 1.9 percent federal pay raise for civilian employees in the spending package it passed into law just last month.

Federal employees are still waiting for their agencies to make those adjustments to their paychecks for this year.

Budget pushes GSA-OPM merger forward

This time, however, the proposals are part of the 2020 budget for the General Services Administration, not the Office of Personnel Management.

“The budget restructures governance of one of the government’s larger and most impactful investments — a federal workforce of 2.1 million civilians — by supporting a full reorganization of the Office of Personnel Management,” the administration wrote in one of its 2020 budget fact sheets on government reorganization.

OPM currently manages the Civil Service Retirement and Disability Fund and the Employees Health Benefits Fund, from which federal employees’ health and retirement benefits are paid.

The move represents an attempt by the Trump administration to implement at least one of its reorganization proposals, which the Office of Management and Budget first publicly announced last June, without Congress.

It has since been unclear which reorganization proposals OMB thought it could implement on its own and which ones needed legislative help. OPM and GSA had previously said it would reorganize the personnel agency in phases. The transfer of HR Solutions, OPM’s in-house, fee-for-service organization that manages USAJOBS.govUSA Staffing and USA Hiring, among other projects, would be the first to go to GSA. OPM’s health and retirement services would go later, agency officials said back in July.

The president’s 2020 budget doubles down on the agencies’ plans to reorganize. The transfer of the governmentwide security clearance portfolio and OPM’s National Background Investigations Bureau to the Pentagon will happen this year, in addition to other OPM functions “to extent permitted by law.”

“The budget reflects the complete reorganization of OPM’s remaining functions within GSA in fiscal 2020, including OPM’s Retirement Services and Healthcare and Insurance organizations, through a combination of legislative proposals and appropriations to cover GSA’s transition costs of assuming OPM’s remaining functions,” the fact sheet reads.

Several federal employee organizations expressed concern with the administration’s plans to move ahead with the OPM-GSA merger.

“It is clear the administration intends to proceed with eliminating OPM and roll these programs into GSA without proper congressional oversight or approval,” Ken Thomas, president of the National Active and Retired Federal Employees (NARFE) Association, said Monday. “NARFE strongly objects to the Executive Branch unilaterally reorganizing federal agencies without input from stakeholders and Congress.”

The Senior Executives Association said it feared the Trump administration wasn’t paying serious attention to planning and change management efforts associated with the OPM-GSA reorganization.

“Characterizing OPM’s functions as simply transferable to the GSA is easier said than done and ignores OPM’s central statutory role in the federal merit system,” SEA President Bill Valdez said in a statement. “Simply moving boxes on an org chart and superior technology are no saviors for inadequate planning and a people-focused change strategy. I urge the administration to bring stakeholders to the table to better understand the reorganization plans for OPM and to better share information with the public so it can have confidence that taxpayer resources are being used wisely.”

The administration’s proposed cuts to federal employee health and retirement benefits are all part of the president’s 2020 budget request, which OMB released Monday morning. Monday’s release provides only a snapshot of the president’s proposals. More detail from OMB is expected next week.

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