House passes reconciliation bill that cuts federal employee retirement benefits

The House voted 215-214 along party lines early Thursday morning to pass its budget reconciliation package that includes a slimmer range proposed cuts to federal workers’ retirement benefits. The bill now heads to the Senate for consideration.

Last month, the House Oversight and Reform Committee advanced its portion of the bill, which would cut federal spending to partially pay for tax cuts for the wealthy and increased immigration enforcement. The measure included provisions requiring employees previously exempted from higher Federal Employees Retirement System contribution rates enacted a decade ago to begin paying 4.4% of their basic pay toward their pensions, eliminating the FERS supplement for most federal workers who retire before Social Security kicks in at 62 and changing the formula that calculates a retiring employee’s annuity payment from an average of their highest three years of salary to one based on their highest five years.

It also would require new federal employees to choose between paying nearly 10% of their basic pay toward their FERS benefits or serving on an at-will basis with no civil service protections.

In the intervening weeks, House Republicans further tweaked the bill to better exempt law enforcement personnel and other federal workers who are subject to mandatory retirement ages from the FERS supplement elimination and delaying implementation of the High-5 annuity proposal by one year. The changes also included the removal of the plan to require employees hired prior to 2014 to pay 4.4% of their basic pay toward their FERS benefit.

But before the vote Wednesday night on the House floor, the chamber’s leadership made further changes following pressure from Oversight Committee Democrats and some Republicans, specifically removing the High-5 calculation altogether. However, plans to eliminate the FERS supplement, a benefit that amounts to roughly one-third of a new retiree’s post-separation income, remain in the legislation.

If enacted as currently written, the FERS supplement would be eliminated beginning Jan. 1, 2028, though language stipulates that any federal worker already “entitled” to retire with the supplement on that date will retain their eligibility.

In a letter Wednesday, American Federation of Government Employees National President Everett Kelley urged lawmakers to abandon these “toxic” provisions.

“This bill released Sunday night proposes approximately $15 billion in FERS cuts over a 10-year period, offsetting less than 1% of the bill’s cost while doing incalculable damage to both future and current federal employees,” he wrote. “[The] bill’s FERS provisions will compromise the civil service and drive out experienced and dedicated federal workers who deliver vital services to your constituents, while contributing almost nothing to reducing the bill’s cost.”

And National Active and Retired Federal Employees Association President Bill Shackelford criticized the bill for continuing to “claw back” benefits that many federal employees have already earned and vested in.

“Worse, the bill may retroactively reduce the retirement benefits of individuals taking a voluntary early retirement offer as part of ongoing reduction in force actions,” he said in a statement. “[House] members have been hearing it from their constituents. Now we urge all federal employees and retirees to let the Senate hear it as well. This isn’t the final product. NARFE will keep fighting until all of this bill’s onerous provisions directed at federal employees and retirees are removed.”