Pay, pensions, premiums: So many horrible options, so little time

Folks assigned to watch the backs of active and retired feds have a lot of skin to cover as the debt ceiling D-Day approaches. Pay, pensions and health premiums are very definitely in the line of fire, according to insiders whose job is to track the intentions of Congress and the White House.

Many of the experts say members of the federal family will be lucky to get away with only one hit like, for example, a one-year extension of the current two-year federal pay freeze. Others expect the damage will range from bad to very bad for federal workers, postal employees and retirees too.

If the politicians next week fail to come up with a solution, the other alternative could be widespread furloughs. Congress, of course, would be exempt.

Most of the worst-case options facing feds originally came from the bipartisan debt reduction commission appointed by President Barack Obama. It was supposed to come up with suggestions – which Congress could vote up or down – to save and raise money. It did. But, as with so many other bipartisan commission reports, Congress punted without taking action. Nothing new there.


Then the power base switched to the Senate Democrats, House Republicans and finally to the bipartisan powerful-but-manageable Blair House group. It is chaired by the vice president and composed of Senate and House leaders, and both critics and protectors of the federal workforce.

Insiders say the Blair House, or Biden group, is likely to come up with recommendations (many borrowed or refined from the debt reduction commission) that would be part of the or-else compromise Congress and the White House must reach by Aug. 2.

Those options are:

  • Extending the current two-year federal pay freeze at least one more year.
  • Changing the yardstick used to measure inflation. The effect of going to the so-called Chained CPI would be to reduce future cost-of-living adjustments for federal, military and social security recipients by .25 percent each year. This would be the biggest permanent savings of any of the possible changes. The Federal Times estimated that if this system had been in effect over the last 10 years CSRS retiree annuities on average would be $4,000 less per year than they get now and FERS retirees would be getting $2,600 less.
  • Require future hires to contribute up to six percent of their salaries toward their FERS retirement program.
  • Increase the contributions of current FERS and CSRS employees in several stages, which would reduce their take home pay. This would be especially harsh if the pay freeze is extended.
  • Adjust annually the share of health premiums employees and retirees pay for their insurance plans. Over time, the amount workers/retirees pay would increase as the government share dropped. Feds and retirees now pay about 30 percent of their total premium. By some worse-case estimates that would have Uncle Sam and his workers/retirees splitting the premium tab by the year 2020.

If politicians do their job and meet the next deadline (always an iffy statement) you should know by next week what your new pay, retirement and health package looks like.

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