Over 100 Members of Congress Send Letter Opposing Changes to Federal Retirement Benefits
President Trump’s budget proposal, released in May, proposed $3.6 trillion in cost reductions. Among the proposals were dramatic changes to the federal retirement system – changes that would impact both current and future retirees.
“Viewed in the context of the broader labor environment, the administration believes the implementation and phasing in of these changes will not impact the federal government’s recruiting and retention efforts,” the budget proposal states.
However, it has been noted that the proposals would undoubtedly impact federal employees and their personal budgets, particularly those who have already retired and based their financial planning on previously promised benefits.
The budget proposal includes four main changes to the federal retirement system. As outlined by Federal News Radio, those changes would mandate:
- An increase in employee contributions by 1 percent each year for the next six years.
- An elimination of the cost-of-living adjustment (COLA) for current and future Federal Employee Retirement System (FERS) participants and cutting the COLA by 0.5 percent for Civil Service Retirement System (CSRS) participants of what the typical formula currently allows.
- Basing future retirement benefits on the average of an employee’s highest five years of salary. Currently, retirement benefits are based on an employee’s length of service, salary and highest three-year average salary
- Eliminating supplemental payments to employees who retire before age 62.
The COLA elimination and increased employee contributions are estimated to be the most potentially costly to federal employees. As highlighted last week, financial planner Arthur Stein has demonstrated just how impactful the cuts would be:
“Over as little as 10 years, a 72-year old retiree would “lose” — as in not receive — up to 18 percent in COLA payments if inflation was 3 percent, and lose up to 26 percent if inflation during the period averaged 4 percent.” Charting Stein’s data makes the potential impact of the cuts readily apparent:
This week, more than 100 Members of Congress signed onto a letter opposing the changes. In the letter, the members write that the changes to retirement benefits are fundamentally unfair.
“This breaks a promise to current federal employees and retirees. We should not alter policies that families have planned their lives around, particularly when it affects current retirees with limited ability to make up for unforeseen reductions in expected income.”
A letter sent by the Federal-Postal Coalition on behalf of 30 groups expressed similar reservations.
“In exchange for years of hard work over long careers, our government made a commitment to middle-class federal and postal workers in the form of modest federal pensions in retirement. Those pensions are not gifts; they were earned. Diminishing their value in any way for current employees and retirees fails to honor the commitments made to our public servants.”
Posted in General News