The House Oversight and Government Reform Committee is considering cuts of about $50 billion from mandatory spending. Much of this could affect federal employee and retiree benefits. Lawmakers on the committee passed a framework of proposals in a close vote of 216-214 on April 10.
None of these proposals are final. They have sparked significant concern within the National Active and Retired Federal Employees Association (NARFE). NARFE has voiced its opposition in a letter to Congress.
“Given the only major mandatory spending under the committee’s jurisdiction is federal retirement and health benefits, cuts of such a magnitude would necessarily come from cuts to federal retirement and health benefits,” NARFE wrote. NARFE opposes moving the Federal Employees Health Benefits (FEHB) from a premium-share model to a voucher model. Currently, the government covers 72 percent of the weighted average of all FEHB plan premiums.
The proposal suggests switching to a flat-rate voucher indexed to consumer price increases. This change is expected to shift substantial costs toward federal employees and retirees. NARFE argues that this would result in employees and retirees paying significantly higher percentages of premiums over time.
It would make earned retiree health benefits unaffordable. NARFE strongly opposes the elimination of the Thrift Savings Plan (TSP) G Fund subsidy. This proposal would force federal employees and retirees to shift their retirement savings from the G Fund to potentially subpar investment products.
NARFE argues that this would violate fiduciary responsibilities. It could lead to negligible budget savings while damaging the retirement savings of federal employees and retirees.
Cuts threaten federal benefits
The proposal to raise the Federal Employees Retirement System (FERS) contribution rate to 4.4 percent is also opposed by NARFE. The organization views this as an effective pay cut. It would further widen the pay gap between federal employees and private-sector counterparts.
This gap currently stands at nearly 25 percent according to the Federal Salary Council. NARFE opposes converting new employees to at-will employment unless they agree to a higher FERS contribution. Such a move, they argue, would undermine the merit-based civil service.
It would open the door to cronyism and corruption. NARFE is against introducing a fee for Merit Systems Protection Board (MSPB) appeals. This could deter employees from challenging potentially illegal and politically motivated actions.
Another proposal is to base FERS annuities on the high-5 instead of the high-3 salary. NARFE claims this would reduce the annuity value for already vested employees. It would break promises to those near retirement.
The final contested proposal is the elimination of FERS supplemental retirement payments. These payments cover the gap for retirees who are not yet eligible for Social Security. According to NARFE, this could significantly impact federal employees forced into early retirement.
It would cost them substantial financial losses. NARFE maintains that these proposals undermine the benefits federal employees have earned through long careers in public service. It calls on Congress to reconsider these measures.
Image Credits: Photo by Karl Callwood on Unsplash
