By Jolie Lee
Federal News Radio

The President’s speech Wednesday did not address how federal employees’ pay and benefits would be impacted by a plan to reduce the deficit by $4 trillion over 12 years.

Some recommendations made late last year by the bipartisan deficit reduction commission headed by Erskine Bowles and Alan Simpson proposed cuts to federal pay and benefits. Whether these proposals will be incorporated into President Obama’s plan is unclear.

Federal Times editor Steve Watkins outlined some of the proposals in the Simpson-Bowles plan that would impact federal employees.

• Pay freeze for three years
• Weakening of health care benefits
  Watkins said currently federal employees pay about 30 percent of their premium and the government pays for the rest. The Simpson-Bowles plan proposed a fixed subsidy so feds would pay a certain dollar value opposed to a percentage.

  “The concern is health care costs have been skyrocketing for years,” Watkins said. “Over time, that would really take a bite out of paychecks and annuities.”

  Another impact of this proposal would be to drive feds to enroll in lower cost health care plans.

  “It would leave a lot of feds and retirees very vulnerable if they had a major ailment,” Watkins said.

• High-five retirement formula
  The commission proposes changing how employees’ retirement benefits are calculated, using a high-five average instead of a high-three. In other words, pensions would be determined by the average salary of the last five years worked, and not the last three years worked.
• Reduce federal workforce by 10 percent
  The commission proposed cutting 200,000 federal jobs – or 10 percent of the federal workforce – through attrition.

  The recommendation to cut government jobs comes at the same time that some agencies recognize an overreliance on contractors, Watkins said.

  Some agencies – such as Homeland Security and the Defense departments and the intelligence community – rely on specialized skills that cannot be hired in-house, he said.

  “I don’t think the current debate about cutting or limiting the federal government necessarily has to put an end to the insourcing initiative,” Watkins said.

As lawmakers discuss the debt ceiling and spending caps, the debates will “make the most recent fight in Congress look like small potatoes,” Watkins said.

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