For federal and postal workers and retirees the good news is that the Trump administration has not forgotten about you. The bad news is the same: They haven’t forgotten about you.
Despite China, North Korea, Iran and some potentially serious domestic problems here on the home front, the White House wants feds to pay more for, and get less from, their retirement package. The administration also wants to lose an invaluable cash gap payment for workers who retire before age 62, even if their job requires they do so. And finally, the White House has again revived an ancient but still scary proposal that would trim the starting annuities of feds retiring in the future.
All of the proposals have been made before. Some have been around for decades. Last year it appeared a couple of them might actually make it into law until Congress did what it does so well — nothing. A number of the plans that were in 2017 and previous benefits-cut packages are not on the shopping list that the Office of Personnel Management sent to the House on Monday. The American Federation of Government Employees got wind of the size and shape of the 2018 effort to cut federal retirement costs.
The administration says the plan would save the government $143.5 billion in future. Put another way, it would either cut benefits for retirees or raise pension-funding costs for those still working by $143.5 billion.
Though they are a shock at times to some people, most feds could probably recite them in their sleep. They have been around that long. If Congress approves (a big IF) they would:
Eliminate the gap payment — sometimes worth thousands of dollars — that Federal Employee Retirement System (FERS) employees get if they retire before qualifying for Social Security at age 62. Thousands of workers are in jobs such as law enforcement, air traffic control and public safety that force them to retire at age 57. Losing that gap payment would be a major financial blow to most.
Require current FERS employees to contribute an additional one percent a year, each year for up to six years or until such time as they were paying half their retirement costs. At the same time their future annuity would be reduced because they would lose even partial inflation-protection.
Eliminate cost of living adjustments (COLAs) for current and future FERS retirees starting in 2019. Without regular inflation catch ups, the retirees would lose tens of thousands of dollars over time as prices go up but the annuity stays the same. Most private sector retirement plans have no COLA protection. But unlike the federal programs, CSRS and FERS, most private sector workers don’t contribute anything to their company plan.
National Active and Retired Federal Employees President Richard Thissen said the proposal is a breach of contract.
“In exchange for years of hard work over long careers, our government made a commitment to middle class federal and postal workers that they would receive federal pensions in retirement,” he said. “Those pensions are not gifts. Diminishing their value in any way for those who have already earned them – including by eliminating or reducing COLAs, altering how they are calculated, or eliminating an entire element of the pension – fails to honor the basic commitments made to our public servants.”
Thissen and Federal News Radio reporter Nicole Ogrysko will be my guest today on the Your Turn radio show. They will explain the proposed changes, their cost to you and the odds of any one, or all of them, becoming law this year — and what, if anything, you can do about it, like retiring before the changes take place. The show airs at 10 a.m. EDT at www.federalnewsradio.com or 1500 AM in the metro Washington area.