Bill approves reduction of retirement benefits for federal employees in the House of Representatives

In a move that has sparked concern among federal employees and retirees, the House has passed a budget reconciliation package that includes cuts to federal workers' retirement benefits. The bill, now moving to the Senate for consideration, has been met with criticism from various organisations, including the National Active and Retired Federal Employees Association (NARFE) and the American Federation of Government Employees (AFGE).

The bill proposes significant changes to the Federal Employees Retirement System (FERS), the primary retirement system for federal employees. One of the most contentious provisions is the change in the formula that calculates a retiring employee's annuity payment. Instead of basing it on an average of their highest three years of salary, the new formula will be based on their highest five years.

Another point of contention is the requirement for some federal employees to pay 4.4% of their basic pay toward their pensions. This requirement is expected to impact both current and future federal workers. Critics argue that these provisions are toxic and compromising to the civil service, potentially driving out experienced and dedicated federal workers.

The bill also proposes the elimination of the FERS supplement, a benefit that amounts to roughly one-third of a new retiree's post-separation income. This change is scheduled to take effect from January 1, 2028, with an exception for federal workers already entitled to retire with the supplement on that date.

Moreover, the bill may retroactively reduce the retirement benefits of individuals taking a voluntary early retirement offer as part of ongoing reduction in force actions. This provision has been criticised as particularly harsh, as it could affect those who have already made plans based on their expected retirement benefits.

The bill also requires new federal employees to choose between paying nearly 10% of their basic pay toward their FERS benefits or serving on an at-will basis with no civil service protections. This requirement has been criticised for being unfair and potentially deterring talented individuals from entering federal service.

The FERS supplement elimination and the proposed changes to the annuity calculation formula are expected to generate approximately $15 billion in FERS cuts over a 10-year period. However, these cuts offset less than 1% of the bill's cost, leading critics to question the justification for these measures.

In response to these developments, NARFE urges all federal employees and retirees to let the Senate hear their concerns about the bill. The AFGE National President Everett Kelley wrote a letter urging lawmakers to abandon the proposed FERS provisions, and NARFE has pledged to continue fighting until all of the bill's onerous provisions directed at federal employees and retirees are removed.

As the bill moves to the Senate, it remains to be seen how these controversial provisions will be received and whether any changes will be made in response to the concerns raised by federal employees, retirees, and their advocacy groups.

Bill approves reduction of retirement benefits for federal employees in the House of Representatives