As we’ve discussed before, President Trump proposed devastating cuts to the retirement benefits of federal employees in his 2018 budget request. This far-reaching and unnecessary attack would undermine the retirement security of current and future federal employees. While Trump sticks by his harsh proposal, Republican members of Congress have taken positions on both sides of the issue. Let’s explore the latest developments.
This week members of the House Budget Committee have been working on their Fiscal Year 2018 budget resolution. Congress must pass a 2018 budget resolution because Republican legislators need a parliamentary tool called “budget reconciliation” to pursue their tax reform goals. In their 2018 budget proposal, House Republicans call for increased contributions from federal employees.
While the budget proposal is light on details, it does want federal employees “to make greater contributions to their own defined benefit retirement plans.” It would also end the “special retirement supplement,” something that Trump’s budget proposal also contained. The special retirement supplement covers the equivalent of Social Security benefits for retired federal employees until those employees reach normal retirement age for Social Security. The House budget proposal does not mention Trump’s request to change the pension benefit calculation from the highest three years of salary to the highest five, nor does it mention his proposal to eliminate cost of living adjustments.
The House budget proposal also calls for future federal employees to move to 401(k)-style, defined contribution plans. This would be a huge mistake. We now have ample evidence that 401(k)-style defined contribution plans weaken retirement security and that diminishing pension benefits increases income inequality. Furthermore, federal employees already participate in a hybrid retirement system. Federal employees rely on the so-called “three-legged stool” of retirement savings: their defined benefit pension; the Thrift Savings Plan, which is a defined contribution plan; and Social Security. Eliminating the pension component completely would devastate the retirement security of federal employees.
Despite this disappointing budget proposal, some House Republicans are taking a stand in favor of retirement security for federal employees. In a letter last month to Speaker Paul Ryan and other members of House leadership, nine Republican House members wrote in opposition to Trump’s proposal to attack retirement benefits for federal employees. They pointed out that proposals to increase employee contributions, which amount to a cut in take-home pay, have been offered before and have failed: “Recycling discredited proposals targeting federal workers is disruptive to them, and demoralizing to all middle-class civilian worker families.”
Even though it’s unclear whether President Trump’s 2018 budget proposal will pass- or even be voted on- it’s clear that threats to pensions for federal employees are still lurking. Federal employees and their allies must remain alert and support the efforts of those who are willing to stand up for the retirement security of working families. Will you join us?
