House advances 2018 budget resolution with federal retirement cuts

This story has been updated Thursday, Oct. 5 to indicate the resolution passed the House with a 219-206 vote. 

The House passed a 2018 budget resolution that sets the stage for Congress to make billions of dollars in cuts to federal retirement.

The resolution includes “reconciliation instructions,” which charge the House Oversight and Government Reform Committee to develop legislative proposals to reduce the federal deficit by $32 billion over 10 years through reforms to civil service pensions.

Those reforms would include:

  • Higher employee contributions to the federal defined benefit pension plan;
  • An elimination of supplemental payments to employees who retire before age 62;
  • A switch to a defined contribution pension plan for new federal employees.

Passing this resolution is another small step in a long, complicated process to enact deeper cuts to federal retirement and compensation.

Advertisement

“This would achieve significant savings while recognizing the need for new federal employees to transition to a defined contribution retirement system,” the House Budget Committee’s report on the resolution reads. “The vast majority of private sector employees participate in defined contribution retirement plans. These plans put the ownership, flexibility and portfolio risk on the employee as opposed to the employer. Similarly, federal employees would have more control over their own retirement security under this option.”

According to a count from the House Budget Committee Democrats, the budget resolution includes $163 billion over 10 years in total cuts to federal compensation and retirement benefits.

For example, the resolution supports changing the formula for the government’s contribution to the Federal Employee Health Benefits Program (FEHBP). Instead of the current formula, which caps the government contribution at the average weighted rate of change in FEHB programs, the House resolution suggests tying government increases to the rate of inflation.

The latest version of the House resolution also includes a proposal that would reduce the G fund’s rate of return in the Thrift Savings Plan.

“Securities within the G fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. government,” the House report said. “Yet the interest rate paid is equivalent to a long-term security. As a result, those who participate in the G fund are rewarded with a long-term rate on what is essentially a short-term security.”

This isn’t the first time lawmakers have suggested such a proposal, and both the Federal Retirement Thrift Investment Board and federal employee groups have previously said the change would make the G fund practically worthless for TSP participants.

The House Budget Committee first introduced the resolution with more vague proposals to make $32 billion in cuts to federal retirement back in July. It also includes reconciliation instructions to 10 other House committees to make other cuts to mandatory spending.

If the House passes the budget resolution, which it is expected to do Thursday, it would allow Republicans to advance a tax reform bill through the reconciliation process.

Some lawmakers have already expressed their opposition to these proposals, including 100 House Democrats who wrote to House Speaker Paul Ryan (R-Wis.) and Minority Leader Nancy Pelosi (D-Calif.) back in June.

“Federal employee pay and benefits are not the cause of this country’s deficit and debt,” Rep. Gerry Connolly (D-Va.) said Wednesday from the House floor. “The federal workforce has already contributed nearly $200 billion toward reducing the country’s deficits in the form of pay freezes, pay raises insufficient to keep pace with inflation, furloughs and increased retirement contributions.”

Ten House Republicans have also said they opposed the effort to cut federal retirement benefits, but the resolution’s passage would set Republicans on a path to advance one of their top legislative priorities.

The National Active and Retired Federal Employees (NARFE) Association, which has been closely watching for this exact scenario, asked House lawmakers to oppose any resolution that includes federal retirement cuts.

“These are neither fair nor prudent policies, yet any budget resolution containing reconciliation instructions for [the House Oversight and Government Reform Committee] endorses them prior to any significant evaluation,” NARFE National President Richard Thissen wrote in a letter to House members.

The ideas included in the House resolution are similar to the four major changes President Donald Trump offered in his own  2018 budget request.