WASHINGTON - Federal workers are fiercely battling a provision in the House version of the budget bill that would slash their retirement benefits and boost their contributions.
"There's an assault taking place on federal workers," said Sen. Paul Sarbanes, D-Md., at a federal employee rally on Capitol Hill late last month. "It's unfair to the workers and it's unfair to the country."
The House version of the budget resolution would increase federal employee contributions by 2.5% of pay into their respective retirement systems by 1998. Both House and Senate versions eliminate the generous treatment members of Congress recieve; both versions also contain a provision that would base annuity calculations for retirees on a worker's average five highest years of salary for retirees, instead of the current three highest years of salary.
The National Treasury Employees Union, which represents 152,000 non-postal federal employees, is waging an all-out attack on the provisions, with the rally on Capitol Hill, lobbying efforts and a mass mailing to members urging them to contact their congressional representatives.
"We are trying to influence the outcome of the conference," said Susan Holliday, a spokeswoman for NTEU.
But some experts argue the increase is overdue; employee contribution rates have not changed since 1969, yet rates contributed by federal agencies on behalf of employees have increased steadily.
Each year, the government and federal agencies make contributions to fund pension benefits due in the two retirement systems: the Civil Service Retirement System, which covers federal workers employed before 1984, and the Federal Employees' Retirement System, which covers federal workers entering jobs after 1983 and some who voluntarily switched from the civil service system in 1987. According to a 1993 report by the Office of Personnel Management on the two federal retiree systems, the government is expected to contribute $23.8 billion in 1995. Under existing rules, the contributions will more than double to $51.5 billion by time the first baby boomers retire in 2015.
"Sooner or later this gap needs to be closed," said one congressional staff member who has worked on the provision.
The staff member said the government's contributions are budgeted in each year and this funding burden would mostly go to taxpayers.
"If Congress doesn't act to resolve this now, it will just come around next year," the staff member said.
But testimony given by a Government Accounting Office official at a recent hearing on the federal retirement system indicated the current system doesn't need to be fixed.
Johnny C. Finch, assistant comptroller general at the GAO, told the Senate Subcommittee on Post Office & Civil Service the agency has "seen nothing thus far in our work that would suggest that FERS is a poorly designed program or that it will not meet the government's and employees' needs."
Mr. Finch didn't comment on the need to adjust the civil service system because it has been closed to new entrants.
But Mr. Finch did suggest there may be a better approach for a federal retirement system.
"Some options to explore might include moving more toward a defined contribution program by making the thrift plan a greater part of the package, or even eliminating the pension plan portion in favor of an enhanced thrift plan and Social Security," Mr. Finch said. "In this manner, government costs could be more easily identified and controlled."
Mr. Finch is not the only official who has suggested other ways to prepare federal workers for retirement - congressional representatives have introduced legislation to adjust the system. Among them are:
Sen. Richard Bryan, D-Nev.: His legislation would make congressional retirement benefits equal with other federal employees. Currently, nembers of Congress in civil service system contribute 8% of pay, while federal employees contribute 7% of pay into the system; members of Congress in FERS contribute 1.3% of pay, while federal employees contribute 0.8%. The bill also would balance accrual rates.
Sen. Bob Kerrey, D-Neb., Sen. Alan Simpson, R-Wyo.: Their legislation would cut the annual accrual rate by 0.1% and would calculate benefits by using the federal employees' five highest years of salary.
Rep. Gil Gutknecht, R-Minn.: This legislation would allow congressional members elected in 1994 to accrue pension benefits for up to 12 years. Members elected before 1994 would be allowed to accrue pension benefits for 12 additional years, starting with the 104th Congress. Pensions for new members would reach a maximum annual benefit of $27,254, under current formulas.
Rep. James Moran, D-Va., says slashing federal retirees benefits makes the government less competitive when trying to hire quality employees. At a hearing of the Senate Subcommittee on Post Office & Civil Service, Mr. Moran said: "The government, like any other employer, uses its retirement plan to recruit new employees and encourage older, higher-paid employees to leave."
"If we truly want to reform the federal retirement system, we should ....... do it through a concerted, comprehensive and bipartisan approach. .......We should not enact piecemeal changes and search for a justification later."