House Democrats and federal-employee groups want President Barack Obama to chuck the chained CPI.
More than 100 members of the House have signed on to a letter to Obama from Rep. Allyson Schwartz (D- Pa.) requesting that the upcoming White House budget not include a proposal to alter the way retirees’ cost-of-living adjustments are calculated.
Last year, Obama’s budget called for adopting what’s known as the “chained Consumer Price Index,” which assumes that as prices on household goods and services increase, people opt for lower-cost items. That is expected to reduce annual COLA increases by 0.3 percentage points each year.
However, Democrats and federal-employee groups say those small annual reductions will snowball over time and could lead to hardship for long-time retirees.
“Switching to a chained CPI would be devastating for seniors, veterans, federal retirees, disabled individuals and others,” Schwartz’s letter stated.
The median annual benefit under the Civil Service Retirement System (the retirement system for employees hired before the mid-1980s), is about $31,400, according to the Office of Personnel Management.
Under the chained CPI, though, benefits would grow more slowly with inflation. Over five years, CSRS retirees would lose out on about $1,500, according to an online calculator created by the National Active and Retired Federal Employees (NARFE) Association. After 15 years, that would shoot up to more than $14,788 in reduced benefits.
Letter gains support from employee groups
Among the lawmakers signing the letter are Reps. Bruce Braley (D-Iowa), Cheri Bustos (D-Ill.) and David Cicilline (D-R.I.).
“We hope the President listens thoughtfully to their well-reasoned arguments, and steps back from his previous support of the chained CPI,” NARFE National President Joseph Beaudoin said in a statement.
NARFE, the American Federation of Government Employees and the Military Officers Association of American have also signed on in support of the letter.
Rep. Chris Van Hollen (D-Md.) told AFGE members earlier this month that Obama promised he wouldn’t propose any retirement-benefit cuts in his fiscal 2015 budget — but it’s unclear if that includes the chained CPI.
In addition to changing the COLA formula, last year’s White House budget also proposed requiring federal workers to contribute about 1 percent more toward their pensions. Congress never took that measure up. Instead, in the bipartisan budget deal negotiated at the end of last year, Congress agreed to require federal employees hired in 2014 and after to contribute a total of 4.4 percent toward their retirement. Workers hired before 2013 contribute 0.8 percent toward the Federal Employees Retirement System, while those hired in 2013 contribute 3.1 percent.
AFGE National President J. David Cox has said repealing those retirement changes is among the union’s top priorities this year.
“Congress has created a second-class and third-class retirement system in which new federal employees earn less than their peers for no other reason than the date they were hired,” Cox said in a statement.