Federal pay and benefits caught (again) in payroll tax, budget talks

Benefits expert Tammy Flanagan and Federal Times senior writer Sean Reilly will explain how feds could be affected by cuts to the federal budget. January 25, 20...

Federal pay and benefits continue to be on the congressional hit list.

A joint Senate-House conference committee is considering a variety of ways to pay for a payroll tax cut extension. The current one expires Feb. 29.

“Some proposals could have some impact on the federal workforce,” said Sean Reilly, senior writer with Federal Times.

House members of the committee have suggested paying for the cut by freezing federal pay for another year and increasing the percentage feds pay into their FERS and CSRS retirement funds. The one proposal that has feds most up in arms, though, is the change from a high-three to a high-five calculation for retirement annuity.

Federal benefits expert Tammy Flanagan said this last provision, if passed, could change the way federal workers think about retirement.

“Somebody who gets that promotion might now decide to work an extra two years than if it was a high-three scenario,” she said.

At the same time, lawmakers are debating the payroll tax cut extension, the House held a hearing on making changes to federal retirement.

Rep. Dennis Ross (R-Fla.), chairman of the House Subcommittee on the Federal Workforce, is introducing legislation that “overhauls the federal pension system” by increasing the retirement contribution by 1.5 percent of the employee’s salary over three years, according to his opening statements at the hearing.

“My bill also eliminates the supplemental payment to individuals who voluntarily retire before age 62; increases the employee retirement contribution for new hires by 3.2 percent; changes the multiplier used in the pension formula; and uses a five year average salary base,” Ross said.

The changes would apply to both feds and members of Congress.

“The significant thing is this is intended to explore essentially getting rid of the status quo as federal employees have known it for decades,” Reilly said.

Reilly added he did not think there would be an “immediate threat” to the current defined benefit pension.

“But what it does, I think, is shift the center of political gravity to the extent that it makes other proposals — say, increasing the employee contribution rate to FERS — look a little more palatable, a little more moderate,” he said. “You’re not talking about getting rid of the program; you’re just asking federal employees to pay a little bit more.”


Payroll tax negotiations reopen: Are feds’ pay and benefits safe?

Causey column: Snatching defeat from the jaws of victory

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.