Cutting Federal Pension System Would Add to Nation’s Retirement Crisis

Image courtesy FedSmith.com

Image courtesy FedSmith.com

The administration’s forthcoming budget proposal for 2018 is expected to include devastating cuts to the retirement benefits of federal employees, marking yet another unwarranted attack on middle-class civil servants that the National Treasury Employees Union will strongly oppose.
 
The proposed changes will cut the pay of federal employees by increasing their retirement contributions repeatedly for consecutive years. This would easily negate any meager pay raise the administration proposes. In the long term these cumulative increases threaten the retirement security that federal workers around the country – and their families -- are depending on.
 
“It is shameful to attack middle class federal workers who face the same economic challenges as their fellow Americans in trying to pay for college, health care, and housing,” said NTEU National President Tony Reardon. “Federal employees and retirees have earned their pensions. They are part of their employment contract with the American people. It is appalling to go after the modest retirement of nonpartisan federal workers while prioritizing programs and the tax code for the wealthy.”
 
The budget proposal coming out next week is expected to include four adjustments to the Federal Employee Retirement System (FERS) and one change to those employees on the Civil Service Retirement System (CSRS). If approved, they would immediately shrink paychecks and eventually diminish the monthly living allowance of millions of retirees.
 
The proposals reportedly include: raising the amount that federal employees have to pay toward FERS, which is a cut in pay; basing future retirement benefits on the average of the highest five years of salary instead of the current three; eliminating the FERS supplement for employees who retire before they can start collecting Social Security at age 62; eliminating the cost of living adjustments for all current and future retirees covered by FERS; and reducing the cost of living adjustments for CSRS retirees.
 
“It is especially repugnant to go after the cost of living adjustments for current and future retirees. These adjustments are essential for older Americans to keep up with rising costs especially during a period in their lives when their medical expenses often skyrocket,” Reardon said. “America is already facing a retirement crisis. We should not substantially increase the number of retirees unable to support themselves by diminishing federal retirement.”
 
Since 2010, Congress has twice increased required employee contributions to the federal retirement program. Unlike any other group, federal employees were singled out and have now contributed more than $20 billion to deficit reduction through increased retirement contributions, and more than $182 billion overall from combined retirement, pay cuts, and unpaid furlough days in the past few years.
 
Established in 1984 to modernize the retirement system, FERS is fully funded, has no unfunded liability, requires no transfer of funds from general revenues, adds not a penny to the federal deficit, and is widely held out by economists and financial experts as a retirement model with its three-legged structure (Social Security, defined benefit pension and a defined contribution pension (401(k)).
 
“It is true that a president’s budget is not law, but it is a statement of a president’s priorities. In that sense, these proposals indicate a disdain for the nation’s civil service and a disrespect for the millions of American citizens who chose a life of public service,” Reardon said. “NTEU will work on Capitol Hill to prevent these cuts from becoming law.”
 
NTEU represents 150,000 employees at 31 federal agencies and departments.