The House Budget Committee’s report on Rep. Paul Ryan’s fiscal 2014 budget fills in a few more details on how it would affect federal employees. The budget, which the House passed March 21, would get rid of the Federal Employees Retirement System supplemental payment beginning in January 2014. That supplement is paid to FERS employees who retire before age 62, to replace the Social Security payment for which they are not yet eligible.
The bill also would eliminate student loan repayments for federal employees. And its 10 percent federal workforce cut would be achieved by allowing agencies to only hire one new employee for every three who leave.
Ryan’s budget also takes a page from the Simpson-Bowles commission and increases the amount federal employees contribute to their pensions. The House Budget Committee said the retirement benefit cuts could save $132 billion over a decade.
The Ryan budget is sure to run aground in the Democratic-controlled Senate. But some of these proposals could be resurrected later this year, as part of budget negotiations.
Multiple news organizations are reporting that House Speaker John Boehner included the so-called chained Consumer Price Index in his latest proposal to President Obama seeking to avert the fiscal cliff.
This would put a big dent in the deficit — perhaps raising more than $290 billion over a decade — but it would hit federal and military retirees right in their pensions. Economists say the chained CPI is a more accurate method of determining inflation that is usually 0.25 to 0.30 percentage points lower than the current method. Adopting it for pensions, Social Security benefits and other indexed portions of the government’s budget would, over time, dramatically lower cost-of-living adjustments. The change would mean only a few hundred dollars at first for federal retirees. But its effect would compound over time, until eventually federal retirees would likely earn tens of thousands of dollars less than they would under the current system.
As Federal Times reported last week, several federal employee groups had been fearing momentum was building on Capitol Hill to adopt the chained CPI. They oppose such a change, and say federal employees have already contributed $103 billion to deficit reduction over the next decade.
The Office of Personnel Management has cut its backlog of unprocessed pension claims by 21 percent in the five months since it unveiled a new strategy to fix the longstanding problem.
According to statistics posted online today, OPM cut the backlog by 1,150 cases in June, bringing the backlog down to 48,323 unprocessed claims. In January, when OPM announced its plan to fix its problematic pension process, the inventory was 61,108.
But even though OPM has made progress so far in 2012, the size of the backlog is still far greater than it was in October 2010, when OPM Director John Berry pledged to fix the problem. That month — when Federal Times first reported that many retirees were waiting six months to a year for pensions that were often half of what they were owed — OPM said it had 38,400 cases backlogged.
Still, OPM is making progress. The backlog has now fallen for five months straight. And OPM processed 8,964 cases in June, about the same amount as it processed in May. That is more than the 8,500 claims it expected to process in June.
And OPM received 7,814 retirement claims last month, slightly fewer than the 8,000 it expected.
For more information on what OPM is doing to fix this decades-old thorn in its side, read our exclusive interview with Associate Director of Retirement Services Ken Zawodny here, and our original story on OPM’s new strategy here.
The Office of Personnel Management saw a hiccup in its pension processing efforts in April, when the number of claims processed dropped to 8,028. That was slightly below the 8,300 claims it expected to process that month, and noticeably below the 12,386 claims it processed in March.
But May brought slightly better news for OPM. According to monthly stats released today, the number of claims processed in May jumped back up to 9,066 — about 500 more than OPM anticipated it would process last month. This helped bring the size of the backlog down to 49,473 — about 5,100 fewer cases than it expected to have by the end of May.
And for the second month in a row, the number of retirement claims actually received by OPM was lower than anticipated. OPM expected 8,000 feds to retire last month, but only got 7,523 retirement applications.
Federal Times also reported earlier today that 18 percent of retirement applications last year had errors that then had to be fixed by OPM.
For several months, we’ve been tracking a disturbing increase in federal retirements — one which both complicated the Office of Personnel Management’s efforts to fix the pension process and suggests many feds have had it with the proposed pay and benefit cuts. But OPM’s latest stats show a surprising drop in the number of feds retiring.
OPM said it received 6,616 retirement claims in April. That’s 17 percent less than the 8,000 it expected to receive last month, and 15 percent less than the 7,773 feds who retired in April 2011. Up until this point, retirement claims for the first three months of 2012 were up roughly 11 percent from the same period last year. But when April’s numbers are factored in, that increase drops almost in half, to nearly 6 percent.
It remains to be seen whether April is a blip, or the start of a trend in which retirements slow back down to a more manageable pace.
The rest of April’s stats contained some mixed news for OPM. The number of claims processed dropped from 12,386 in March to 8,028 in April. That was slightly less than the 8,300 OPM expected to process last month.
But there was good news: Despite the slight decline in productivity, the decreased retirement claims helped OPM cut its backlog from 52,274 to 51,016 cases. OPM is now way ahead of the 55,078-case backlog it expected to have in April.
I’ve asked OPM for their thoughts on what might have caused April’s changes and will update this blog when they respond.
UPDATE: OPM just sent me the following statement from Associate Director Ken Zawodny:
The first pillar of our strategic plan is the most simple and most urgent: adding more people to the claims adjudication process. The new hires from January 2012 have completed their initial training and now require coaching and mentoring as they begin to process cases. This is an expected part of the training program and requires the most experienced and effective LAS’s to be coaches and mentors in addition to processing retirement claims. Our front line employees split their time in April between processing cases, training the new hires and working with Navy Lean Six Sigma Team to improve the adjudication process, especially for more complex cases. Strategic investments of time and expertise will continue into May. To date, we have processed 39,116 retirement claims compared to the 32,900 that we estimated having done at this time.
As Director Berry stated in the Strategic Plan for Retirement Services, it is our goal to eliminate the current backlog in 18 months so that 90 percent of retirees will receive their full annuity payments within 60 days of retirement by July 2013.
Federal employees’ Thrift Savings Plan accounts could end up collateral damage in the push to hike federal employees’ pension contributions, the American Federation of Government Employees said yesterday.
At Monday’s meeting with the Federal Retirement Thrift Investment Board, AFGE public policy director Jacque Simon asked for more granular, grade-by-grade data on TSP contribution rates. Simon said she wants to know whether lower-paid federal employees are pulling back on their TSP contributions in response to proposals to increase pension contributions by anywhere from 1.2 percent to 5 percent.
“It’s going to be increasingly important to have access to data like that,” Simon said. “We have good reason to believe that TSP participation by people in lower grades is going to decline as people are forced to pay more for their FERS annuity. [...] It’s crucial we get that [information] not next year, but today.”
The board said it didn’t have data that could be broken down in that way, since it only tracks the dollar amount of employees’ contributions — not percentages of their overall salaries. But the board said it could get limited information on contribution rates for automatically-enrolled feds, although those participants make up a miniscule portion of the overall TSP population. Simon said that would be better than nothing.
The Republican Study Committee yesterday proposed steep increases to the amount federal employees would contribute to their pension plans.
The committee’s budget plan for next year — called “Cut, Cap and Balance: A Budget for Fiscal Year 2013″ — calls for federal employees to split the cost of their pensions with taxpayers. Federal Employees Retirement System employees now contribute 0.8 percent of each paycheck toward their pensions; the government covers the remaining 11.7 percent. This would mean FERS employees would pay 6.25 percent of each paycheck toward their pension. (Plus another 6.2 percent towards Social Security, of course, and their regular Thrift Savings Plan contributions if they choose to participate.)
Employees under the older Civil Service Retirement System would be unaffected, since they already pay the same 7 percent toward their pensions as the government.
The Republican Study Committee said this would save $110 billion over ten years.
The proposal also calls for switching to a so-called chained CPI method for inflation-based adjustments to federal pensions, which the GOP said would save $26 billion over a decade.
And it wants to turn the Federal Employees Health Benefit Program to a premium support system, which it expects would save $27.6 billion over ten years. Under this plan, the government would cover the first $5,000 of premiums for a self-only health plan, or the first $11,000 for a family plan, and federal employees would cover the rest. The GOP plan doesn’t say whether or by how much those subsidies would increase in the future, but when the bipartisan Simpson-Bowles deficit committee considered a similar plan for FEHBP, it proposed increasing subsidies by the gross domestic product plus one percentage point. Critics of that plan said the growth would not keep up with inflation, eventually shifting the bulk of health care costs onto federal employees.
Last year’s Republican Study Committee budget proposal would have frozen pay for five years and cut the workforce by 15 percent. But yesterday’s plan does not include those provisions.
Key congressional negotiators have just signed off on a conference report to extend the payroll tax cut and unemployment insurance, and there’s an unexpected surprise in there. New members of Congress would no longer get a cushy pension, and would instead get the same annuity as rank-and-file federal employees, according to Ali Ahmad, who is a spokesman for Rep. Darrell Issa, R-Calif.
Feds under the Federal Employees Retirement System have their pension calculated at either 1 percent or 1.1 percent, depending on their age. But lawmakers under FERS have their pension calculated at 1.7 percent. That, when combined with their much higher salaries, means lawmakers’ pensions are often more than twice those enjoyed by everyday feds.
Rep. Dennis Ross, R-Fla., who is one of Issa’s deputies, has been pushing to eliminate Congress’ pension perk for some time now. If it passes, this would amount to a big win for him.
The deal also would make new federal employees pay 3.1 percent toward their pensions, instead of the current 0.8 percent. And that element isn’t just upsetting federal unions. Rep. Steny Hoyer, D-Md., called the deal “unacceptable” and said he will vote against it. “We must stop targeting these hardworking men and women while not asking others to contribute their fair share,” Hoyer said.
UPDATE: Ross is from Florida, not California.
A bill that would increase the amount federal employees pay toward their pensions and steeply cut the pensions of future federal employees is continuing to work its way through the House. The House Rules Committee is scheduled to consider HR 3813, the Securing Annuities for Federal Employees Act, at a 5 p.m. meeting today, where it could be amended.
The committee’s approval is the final step before it heads to the House floor. Fred Piccolo, the chief of staff for bill sponsor Rep. Dennis Ross, R-Fla., said it’s unclear when debate on the bill will begin, but said it could happen sometime this week.
But that’s where things get dicey. Last week House Republican leaders rolled the SAFE Act into HR 7, a massive surface transportation bill, to cover that bill’s costs. But House Democrats are united against the bill, and the GOP is facing revolts from conservatives and moderates alike.
Ross is not at all happy his pension bill was attached to the transportation bill, which he plans to vote against. Piccolo said Ross feels any cuts to federal retirement should go to deficit reduction and that it’s wrong to use those cuts to pay for other spending priorities. (That may be the one thing Ross and federal unions agree on.)
So House Republican leaders this morning broke the transportation bill back up into its component pieces, which they hope to pass separately and then later recombine. But that still doesn’t resolve rebellious Republican’s problems with the transportation bill, and HR 7 remains in serious trouble.
However, the SAFE Act may have a better chance of getting passed now that it isn’t lashed to that sinking ship of a transportation bill. Stay tuned.
The House Oversight and Government Reform Committee this evening passed a bill cutting federal pensions on a party-line vote. HR 3813, the Securing Annuities for Federal Employees Act, would raise the amounts federal employees contribute to their pensions by 1.5 percentage points, eliminate the Federal Employees Retirement System supplement for retirees who aren’t yet eligible for Social Security, and drastically cut pensions for future federal retirees. Read more about the bill here.
Rep. Dennis Ross, R-Fla., the bill’s sponsor, said federal pensions are too expensive for the cash-strapped government to continue to cover. But Democrats unanimously blasted Republicans for treating feds like a “piggy bank,” in the words of Rep. Elijah Cummings, D-Md. They say the GOP is asking federal employees to sacrifice their pensions to alleviate the deficit, while refusing to even consider raising taxes on the wealthiest Americans.
And Rep. Gerry Connolly, D-Va., was the most vehement denouncer of the bill. He called it “a new low” for the House GOP, and said Republicans may be close to sadism. Said Connolly:
One has to wonder when the House Republican leadership crosses the line from political opportunism to sadism in its relentless assault on public servants. Do some derive pleasure from denigrating and, with this bill, impoverishing the patriots who volunteer to serve their country?
Ross dismissed accusations that Republicans aimed to trash feds. “It is not at all a swipe at anybody,” Ross said. “There is no vilification going on.”
But as the bill goes to the full House, the rhetoric is clearly heating up. Stay tuned for more information on this bill tomorrow.