Carriers mobilize to oppose FERS bill
Feb. 7, 2012 -- On Jan. 24, Rep. Dennis Ross, the chairman of the House Subcommittee on the Federal Workforce, U.S. Postal Service, and Labor Policy, introduced H.R. 3813, the Securing Annuities for Federal Employees Act. But it probably comes as little surprise that Ross’ measure, were it to become law, would in fact threaten the retirement benefits of federal workers—including postal workers. [Update: A summary of the AFGE's letter in opposition to H.R. 3813 is included below.]
Ross’ proposal calls for entirely eliminating the defined benefit component government workers receive under the Federal Employees Retirement System (FERS). Instead, under the Ross plan, FERS annuitants would be entitled only to the benefits earned through both Social Security and the Thrift Savings Plan (TSP).
“Ross’ bill is a blatant attack on federal pensions,” NALC President Fredric Rolando said, “yet another front in the war on the middle class being pursued by the right-wing faction that now dominates the national Republican party."
The Office of Personnel Management estimates that the annual FERS defined benefit pension is around $13,000 and makes up about 40 percent of a federal worker’s total annuity. “FERS is a modest benefit component, part of a sensible approach to retirement security that’s been in place for a quarter-century,” Rolando said.
“We usually think of FERS as a three-legged stool,” he said, “with the defined benefit component and the TSP designed to complement Social Security.”
Since the TSP can make or lose money in the stock market, Rolando said, federal workers already are somewhat exposed to risk. “So putting workers’ retirement security at further risk by taking away the guaranteed pension portion of FERS makes no sense at all,” he said.
The Thrift Savings Plan operates much like the 401(k) accounts in which many private-sector workers participate. Like the TSP, 401(k)s rise and fall with the stock market—which is why the 2008 stock market crash revealed the danger of placing too much faith in a 401(k) account: Millions of private-sector workers—many of whom were months away from retiring—lost as much as 40 percent of their 401(k) investments in that crash.
Ross argues that, since defined-benefit pensions are disappearing from the private sector, it makes sense to take them away from government workers as well.
“Congressman Ross seems to think that it’s OK to take away a large chunk of a federal worker’s retirement benefit and replace it with something that’s subject to the whims of a volatile stock market,” Rolando said. “That’s exactly backward.”
In a message to the NALC e-Activist Network, Rolando encouraged letter carriers to contact the members of Ross’ subcommittee and encourage them to oppose the bill. At last report, H.R. 3813 has yet to garner even one co-sponsor.
Update: The American Federation of Government Employees (AFGE) wrote a letter to the leadership of the House Oversight and Government Reform committee in opposition of H.R. 3813. Here is a summary of the letter:
H.R. 3813, introduced by Rep. Dennis Ross (R-FL), would require not only massive increases in contributions to pensions by current and future federal employees, but also make draconian reductions in retirement benefits for current and future federal employees.
These cuts would force contribution increases to a retirement system that's fully funded while slashing federal workers' retirement income at the same time.
Federal workers have already contributed $60 billion in deficit reduction through the current two-year pay freeze. The retirement cuts in H.R. 3813 would total an additional estimated $45 billion.
It's important to note that although postal workers are indeed federal employees, our pay is negotiated with the Postal Service and comes from the sale of postage and postal products and services, not taxpayer money. However, our retirement benefit comes from either the older Civil Service Retirement System (CSRS) or the newer Federal Employees Retirement System (FERS), which makes this particular fight ours as well.
The cuts to federal retirement included in H.R. 3813 include:
- for current CSRS and FERS employees, permanent increases in contributions to retirement of 1.5 percent, phased in over three years, starting in 2013.
- for current vested FERS employees, reducing the multiplier from 1.1 percent to 1 percent if they retire at 62 or later, which will cut benefits 9 percent to 10 percent from the current formula.
- for any FERS employees who retire after 2012, eliminating the Social Security supplement if they retire before becoming eligible for Social Security.
- for anyone hired after 2012 with fewer than five years of previous civilian service, they would be in a new category, called Secure Annuity Employee (SAE).
SAEs would have to pay 4 percent—instead of the current 0.8 percent—of their salary to the FERS defined benefit pension, plus 6.2 percent to Social Security, for a total of 10.2 percent coming out of salary, not including any contributions to the Thrift Savings Plan.
SAEs' pensions would be calculated on the basis of the average of the highest 5 years of service (high 5) rather than the current high-3, a benefit cut of about 5 percent.
SAEs' pensions would be calculated on the basis of a 0.7 percent multiplier, rather than the current 1.1 percent multiplier, resulting in a benefit cut of approximately 36 percent.
This new pension system would discourage potential applicants because the economic sacrifice required would make it impossible for them to raise their families and simultaneously plan for a retirement with some amount of dignity.
Federal employees have not been immune to the economic woes of this country. Similar to our private-sector counterparts, federal workers are confronting financial hardships due to unemployed spouses, major declines in the values of their homes, rising health care costs and general living expenses. Many are responsible for supporting their families on a single paycheck.