The White House released its fiscal year 2019 budget proposal Monday that includes significant changes that could affect current and future federal retirees. Some of the proposals are similar to those proposed by the Trump administration last year and would require legislation by Congress to become enacted.
A brief highlight of some of the changes are below. Official documents from the White House website that provide greater detail are included at the end of this article.
SEE ALSO: RSC 2019 Budget Proposes Cuts to Federal Pay, Retirement Benefits (April 26, 2018)
2019 Federal Employee Pay Freeze
“Across the board pay increases have long-term fixed costs, yet fail to address existing pay disparities, or target mission critical recruitment and retention goals. The Administration therefore proposes a pay freeze for Federal civilian employees for 2019. This Administration believes in pay for performance.”
Increase Retirement Contributions For FERS Employees
“This proposal would increase federal employee contributions to the Federal Employees Retirement System (FERS) such that the employee and employer would each pay half the normal cost. For Federal workers in certain occupations, such as law enforcement and firefighting, employee contributions would increase, but the Government would continue to pay a higher share of the normal cost.
By increasing the employee share, the Federal Government’s costs would be reduced. To mitigate the impact on employees, this provision would be phased in over several years, with individuals contributing an additional one percent of their salary each year.”
Eliminate or Reduce COLAs for Current and Future Federal Retirees
“This proposal would reduce the cost of Federal employee annuities via revisions to the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS). The proposal would eliminate cost of living adjustments (COLAs) for FERS retirees, and would reduce CSRS retiree COLAs by 0.5 percent.”
Other Federal Retirement Changes
- Eliminate the FERS Special Retirement Supplement for those who retire before age 62
- Calculate future federal retirement benefits on the average of an employee’s highest five years of salary for those retiring later than 2019 (it is currently is based on the highest three years salary)
Reduce the G Fund Interest Rate in the Thrift Savings Plan
“This proposal includes a change to the “G” fund, an investment vehicle available only through the Thrift Savings Plan (TSP), a defined contribution plan for Federal Government employees. G Fund investors currently benefit from receiving a medium-term rate of return on what is essentially a short-term security. Basing the yield on a short-term T-bill rate instead of the current rate (an average of medium and long term Treasury bond rates) would reduce both the projected rate of return to investors and the cost of the fund to the Treasury.”
Changes to Federal Government’s FEHB Contribution Rates
“This proposal would revise the government contribution rate to base it on a plan’s score from the Federal Employees Health Benefits (FEHB) Program Plan Performance Assessment. Currently all FEHB carriers participate in the assessment, which includes 19 measures of health outcomes, quality, and efficiency. Under this proposal, the Government contribution would range between 65-75 percent depending on a plan’s performance. This proposal would encourage enrollment in high-performing health plans.”
Changes to Federal Employee Sick and Annual Leave
“All Federal employees receive 10 paid holidays and up to 13 sick days annually, as well as 13 to 26 vacation days, depending on tenure. This Budget proposes to transition the existing civilian leave system to a model that has worked well in the private sector, which is to grant employees maximum flexibility by combining all leave into one paid time off category. This would reduce total leave days, while adding a short term disability insurance policy to protect employees who experience a serious medical situation.”
White House 2019 Budget Proposal Documents
The following documents are available from the White House website regarding the 2019 budget proposal:
An American Budget: Major Savings and Reforms (202-page PDF)
Strengthening the Federal Workforce (10-page PDF)