Administration would raise feds' retirement contributions

The Obama administration is proposing a 1.2 percent increase to federal employees’ retirement contributions, which could save $21 billion over the next decade, senior administration officials have said. 

The administration’s proposal to the congressional budget deficit super committee, a panel charged with finding $1.5 trillion in savings over the next decade, pinpoints federal employees benefits. Despite the current two-year federal pay freeze, officials said the administration believes it can make changes to the federal employees retirement contributions while maintaining the ability to attract and retain highly qualified employees.

Administration officials Sept. 19 acknowledged that federal employees “have already tightened their belts” but added that the administration's approach is “much less severe” compared with proposals from some members of Congress.

"This plan follows a balanced approach, asking everyone to do their part and no one has to bear all the burden,” a senior administration official said. “We believe pursuing this balanced approach to the deficit reduction is critical, and we’ll be able to keep our promises made to the men and women in the federal service.”

The retirement benefits that federal workers receive would remain unchanged under the proposal, but their contributions to retirement plans would increase a total of 1.2 percent over three years, which officials said could save $21 billion over 10 years. Federal employees enrolled in the Federal Employees Retirement System currently contribute 0.8 percent of their pay to their retirement plans.

John Palguta, vice president at the Partnership for Public Service, said the 1.2 percent increase would not dramatically affect federal recruiting efforts because new employees are mostly concerned about their overall take-home pay and don’t focus on retirement. However, on the retention side, “it’s going to have a little bit of an impact, at least for the next several years if the plan were enacted,” he added.

“We’re already seeing an increase in retirements, about a 20 percent jump, this fiscal year compared to last fiscal year,” Palguta said. The proposed increase to retirement contributions, along with the pay freeze, could potentially nudge more people to opt for early retirement, he added.

“There have been many things that have been floated in the past that would have even greater cost savings but would cause greater pain for federal employees,” Palguta said. “This [plan] is not nearly as bad as those others have proposed.”
 
To reform federal personnel policies and practices, the administration is also asking Congress to set up a commission that would develop recommendations on how to best overhaul these systems, officials said. Palguta said this effort could offer “glimmers of hope” and be an impetus to fix outdated federal pay systems that were established in 1949.

Officials said the commission would comprise members of Congress, representatives from the president’s labor management council, and experts from industry and academia. Their focus would be on compensation, staff development and mobility, and personnel and performance motivation, among other things.