Federal employee pension benefits are set to be pared back in Republicans’ giant tax and spending package working its way through the U.S. House, another slap at a workforce roiled by Elon Musk’s cost-cutting efforts.
The proposal, which House Oversight Committee and Government Reform Committee Chairman James Comer announced on the evening of April 25, would force many federal civilian employees to pay higher premiums for retirement benefits and to lower their eventual benefits by changing the formula for calculating payments.
The Oversight Committee expects to vote next week on that plan and other workforce changes. If approved, they would be combined into legislation enshrining President Donald Trump’s legislative agenda, which Republicans aim to enact by August without the help of Democrats.
Comer said in a statement that the committee’s proposal would achieve “reduction in the federal deficit of over $50 billion.”
The biggest change would be to raise the premium that many long-time federal and postal employees pay out of their salaries in the Federal Employee Retirement System. Under the current system, contribution rates are arranged by the year an employee started: 0.8% in 2012 and earlier; 3.1% if hired in 2013, and 4.4% if hired in 2014 and afterward. The change would have employees pay 4.4% to raise $30.7 billion over a decade, according to the statement.
The proposal would also try to save $4.75 billion by basing retiree pension benefits on the highest five years of salary rather than the current three highest years. Those benefits are calculated based on top salary received and number of years of in the U.S. workforce.
Other changes being proposed include eliminating supplemental retirement benefits for those who retire before age 62 and are unable to yet collect Social Security, and auditing family members of federal employees to see if they are eligible for health benefits.
Republicans argue that federal employee benefits are too generous compared to the private sector. At the same time, federal employees traditionally accept lower salaries than in the private sector partly because of the promise of those benefits.
Republicans are planning a House floor vote next month on the larger legislation. The bill would then be sent to the Senate, where it could pass without the help of Democrats so long as the targets in the budget resolution the chambers already adopted are followed.
The House GOP has a goal of finding at least $2 trillion in savings to partially offset the cost of extending the 2017 Trump tax cuts, adding new cuts to taxes on overtime, tips and providing new breaks for older people and car buyers. The Senate has given itself leeway in its portion of the budget plan to make as little as $4 billion in cuts.
