Over the past 18 months, budget cutters have floated a variety of plans to cut what they feel is the excessive cost of government. Committees in Congress and commissions appointed by the White House last year recommended:
Extending the current two-year federal pay freeze for another year, or two, or three.
Unpaid mandatory furloughs for federal workers.
Requiring federal and postal workers and retirees to pay a greater share of their health premiums. That would mean a lifetime cut in take-home pay.
Further reducing take-home pay by forcing workers under the CSRS and FERS retirement programs to pay more for their benefits.
Eliminating the FERS “supplement,” which goes to employees who retire early until they become eligible for Social Security benefits at age 62. Feds required to retire before age 62 would not be impacted.
Basing future retirement benefits on the employees highest five-year average salary. The high-five was used for many years until Congress changed it to a high-three calculation.
Switching to a system that would reduce future cost-of-living adjustments for federal retirees. That could mean future COLAs for the retirees would be as much as 0.5 percent less, each year, than under the current system.
Of all the whack-a-fed plans that have been floated, the one that seems to worry employees most (based on emails and calls) is the switch from the high-three to the high-five retirement formula. Even in a period when January pay raises are frozen, many see it as the No. 1 threat. One of the most asked questions is, will they have time to retire should Congress impose the high-five?
The National Active and Retired Federal Employees estimates that switching from the high-three to a high-five formula would reduce benefits an average of $1,424 for future CSRS retirees, and an average of $462 less for future FERS retirees. In order to get the benefit they anticipate under the high-three formula employees would have to work longer. But that’s an average. The loss would be less for some people, greater for others.
Here’s the example of a long-time fed who says the change would cost him more than $2,000 a year, and that if the FERS supplement is also eliminated he would get 24 percent less than he had been expecting. Here’s his math:
“I like the work that you guys do, but on a few occasions now I’ve heard you say the high-five vice high-three doesn’t matter because we haven’t had any raises, just work a few more months and it will be the same. I don’t believe this is the case for all employees.
First, if there was no savings to be had Congress wouldn’t be doing it.
Second, I wish you guys would build a spreadsheet and check your math. It may be negligible for some people, but for others promotions, step increases, or performance based increases may have happened in the last few years. My agency has an alternative pay system which gives performance-based awards to high achievers instead of step increases. I have done the math, and for my FERS pension, were I to retire soon, the difference between high-five and high-three is $2,248 a year. That’s more than negligible. I think that for anyone who has had a promotion in the last few years the result would be similar.
So here is what I may be looking at — instead of a pension of about $47,750 with a $12,000 FERS supplement ($59,750), I will receive a reduction to about $45,500 with no FERS supplement, an overall reduction of about $14,250 or around 24 percent. This blows away all the planning I have been doing.
I understand that changes may need to be made but for Congress to change the rules on someone (high-five, FERS Supplement) who is very close to retirement is just unconscionable. Doing it for junior employees or new hires who have time to plan for these changes is an entirely different matter.” John
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Lawmakers spar over proposed federal retirement cuts Lawmakers should keep their hands off federal employees’ retirement plans, a federal advocacy group said at a House hearing Wednesday. Lawmakers are considering a slew of bills aimed at reducing federal pensions for both lawmakers and rank-and-file workers.
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