Government affairs

The major provisions affecting NALC members in the Trump administration budget for FY 2019 are outlined below.

Federal retirement

• Increase FERS contributions. For active federal and postal employees covered by the Federal Employees Retirement System (FERS), the budget calls for gradually equalizing employee and agency payroll contributions for pension benefits. This would cut our pay and raise our pension contributions by 1 percent of pay per year for up to six years, costing active carriers up to $3,600 annually after six years. (The actual impact would depend on when FERS employees are hired: Letter carriers hired before 2013 now pay 0.8 percent, while letter carriers hired after 2013 pay 3.1 percent or 4.4 percent, depending on their exact date of hire. The FERS contribution rate, which would eventually be split 50-50 for all letter carriers under this budget proposal, now stands at 14.5 percent.)
• High-5 average. The pension cuts don’t stop there for active employees. The budget calls for reducing Civil Service Retirement System (CSRS) and FERS pension benefits for new retirees by basing annuities on workers’ highest average pay over five years (high-5) instead of over the highest three years (high-3).
• Eliminate annuity supplement. It also would eliminate the annuity supplement that covers the gap for employees who retire under FERS before they qualify for Social Security benefits at age 62. For letter carriers and other blue-collar federal employees with physically taxing jobs, this cut would be especially painful.
• Slash COLAs. For all retirees, the administration’s budget calls for eliminating or reducing cost-of-living adjustments (COLAs). For current and future annuitants under FERS (which covers any employee hired after 1984), the budget would eliminate basic annuity COLAs entirely. For those under CSRS, COLAs would be reduced by 0.5 percent each year. These changes would devastate the finances of retirees who rely on annual COLAs to keep up with the cost of living.
• TSP-only coverage for new employees. In media reports about the budget, the administration is also said to be studying a policy to end the defined benefit portion of FERS for all new federal employees (including new career city carriers), leaving new employees with only the Thrift Savings Plan (TSP), the defined contribution plan for FERS participants.
• Reduce the TSP’s G Fund interest rate. This proposal includes a change to the government bond fund ("G" fund), the largest and most popular investment vehicle available in the TSP. Millions of active and retired G Fund investors would receive a reduced rate of return. The new rate would be tied to the interest rate on 90-day Treasury bills instead of an average of medium- and long-term Treasury bond rates. This would reduce the rate from 2.33 percent (in the 12 months ending in January) to 1.55 percent -- which translates into a $1.4 billion annual loss for TSP participants. The cost of this proposal to participants would rise dramatically if longer-term interest rates continue to rise.

Federal Employees Health Benefits

• Higher premiums for workers. For both active and retired federal employees, the budget proposes decreasing the federal government’s contribution to the Federal Employees Health Benefits Program (FEHBP) to 65 to 75 percent, down from the current 72 to 75 percent range.
• Although details for how the new contribution levels would work in practice have not been specified, this proposal would likely increase contributions for all retired members, cutting significantly into their monthly take-home pay. A 7 percentage point cost shift for a $20,000 per year family health plan would raise retiree contributions by more than $1,000 annually.
• The impact of the FEHBP proposal on active letter carriers would be minimal in the near term, since contribution levels are set in the NALC labor contract. But this change would drive the Postal Service to continue to try to shift costs to employees during collective bargaining.

 Postal Service

• Network service cuts. With regard to the Postal Service, the budget calls for $44.49 billion in vaguely defined cuts and revenue changes over a decade. It proposes reducing the frequency of delivery (presumably eliminating Saturday delivery) and scaling back door delivery.
• Authority for higher postage rates. Rather than resolving the pre-funding burden, the budget seems to propose giving the Postal Service greater freedom to raise rates to cover future retiree health care costs. As a result, the administration’s postal proposals are certain to be opposed by all of the Postal Service’s major stakeholders, unions and mailers alike.

Department of Labor

• Budget cut. The Department of Labor would see a $1.1 billion, or 10 percent, budget cut under the administration’s proposal.
• Training cuts. The budget would slash money for training workers who lose their jobs as a result of lay-offs or natural disasters by more than three-quarters, from $220 million in 2017 to $51 million in 2019 – devastating cuts for many workers in Florida, Texas and the Caribbean after last year’s hurricanes. Other job training funds for veterans and Native Americans would be cut by nearly half.
• Union monitoring. One of the few increases in the DOL budget would go the office that monitors union activities. It states that: “The Budget would…support more audits and investigations to uncover flawed officer elections, fraud, and embezzlement.”

Conclusion

“Sadly, the administration seems to have learned little in its first year in office; it is ignoring the growing consensus in the mailing industry on ways to strengthen the Postal Service,” NALC President Fredric Rolando said. “If enacted, the Trump proposals would threaten the long-term viability of the Postal Service and the huge industry it supports.”

Ultimately, the determination of whether or not to incorporate elements of the administration’s request falls to the members of the House and the Senate, who are answerable chiefly to their constituents. This makes it imperative for letter carriers to urge their representatives in Washington to reject attacks on the federal workforce or on the Postal Service and its networks.

NALC will resist any attempts by Congress to adopt any elements of the Trump budget that would target the Postal Service, its employees or its retirees.

The full FY 2019 budget is viewable here.