Get other helpful resources like this in your inbox -- FREE!

Cuts to Federal Employee Retirement Annuities Proposed in House; Denounced by NARFE

June 12, 2009

In a policy reform proposal to President Obama that would potentially save billions of taxpayer dollars over the next five years, House Republican leaders recommended a reduction in the retirement annuities of federal employees and a new rule to require them to work longer to receive their full annuity.  

The proposal, made on June 4 by Minority Leader John Boehner (R-OH) and Minority Whip Eric Cantor (R-VA), proposed the following  [editor's note:  this is from the original language in the proposal here]:

Update The Formula For Federal Pensions To Reflect Private Sector Practices

Initial pension benefits for federal civilian employees are calculated based on the average of employee's highest earnings over three consecutive years. It is common practice in the private sector to base benefits on a five year average. The Congressional Budget Office has estimated that moving to a five year average would save taxpayers $1.2 billion over five years.

Eliminate Full-time Union Representatives From Federal Payroll

Under current law, federal employees who are part of a collective bargaining unit may be granted "official time" to perform representational duties on behalf of the union. While on official time, the employee is paid by the government but is acting on behalf of the union. According to the Office of Personnel Management, in FY 2008 the federal government spent $120 million paying employees for their time spent working on union activities. While some employees only spend minimal time on union activities, others are designated as 100 percent on official time, meaning they are paid to spend all of their time on union activities. In their report, OPM suggests a significant amount of the time spent on general labor-management category (as opposed to dispute resolution or contract negotiations) is spent by those on 100 percent official time. Eliminating 100 percent official time would save taxpayers millions of dollars each year. Savings of just 10% a year would save taxpayers $12 million next year and $60 million over five years.

Eliminate Retirement Payments For Federal Workers Who Retire Before Age 62

The federal government provides civilian employees with a benefit not normally offered to private sector employees, Federal employees who retire at age 55 or older with at least 30 years of service or at age 60 with at least 20 years of service receive until they reach 62 a benefit equal to the estimated Social Security benefit for which the worker will become eligible at age 62. This policy not only encourages federal employees to retire early, but it comes at a significant cost to taxpayers. Preliminary estimates indicate that the early retirement benefit costs taxpayers $267 million a year.

NARFE Deplores the Proposed Cuts

"Not only would these proposals dishonor the government's obligations to its workers, but it also makes public service a much harder sell to the highly talented and skilled individuals needed to take on the challenges of recovering from an unparalleled economic upheaval, fighting two wars and defending the homeland," said National Active and Retired Federal Employees Association (NARFE) President Margaret L. Baptiste.  "The federal government should serve as a model to other employers and should not be a part of the mindless race to the bottom, which has contributed to the growing number of employees without adequate retirement savings or health insurance."

Baptiste concluded, "Federal workers and annuitants have dedicated their careers and continue to give so much for our nation and our ideals.  NARFE urges the Congress not to demean their public service by reducing the retirement and health benefits that  are rightfully theirs."