Tonight, President Trump will deliver his first State of the Union address to Congress. It is unlikely that he will mention pensions for federal employees in his speech, but in the weeks ahead, the president will propose his budget for the federal government for the upcoming year. If last year is any indication, he may call for gutting the pensions of federal employees.
Last year President Trump proposed harsh cuts to pensions for federal workers in his budget. These cuts included:
- Increasing employee contributions to FERS by 1 percent per year for 5 or 6 years
- Calculating pension benefits based on the highest five years of salary rather than the highest three years
- Eliminating cost of living adjustments (COLA) for current and future FERS employees
At the time, Randy Erwin, president of the National Federation of Federal Employees, said federal employees would lose roughly $5,000 per year in take home pay under the President’s proposal. That’s on top of a greatly diminished benefit in retirement.
President Trump found support for his proposed cuts in Congress. Rep. Mark Meadows, chair of the influential House Freedom Caucus, echoed Trump’s call for major changes to the retirement system for federal employees. In recent years, Congressional Republicans have repeatedly called for increasing employee contributions to FERS. In fact, in the House Republicans’ 2018 budget proposal, Republican members called for increased contributions from federal employees.
While the budget proposal was light on details, it did plan for federal employees “to make greater contributions to their own defined benefit retirement plans.” The House budget proposal did not mention Trump’s request to change the pension benefit calculation from the highest three years of salary to the highest five, nor did it mention his proposal to eliminate cost of living adjustments.
The House budget proposal also called for future federal employees to move to 401(k)-style, defined contribution plans. That 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.
After the President presented his budget proposal last year, a group of nine House Republicans wrote a letter to Speaker Paul Ryan and House leadership rejecting the pension cuts. 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.”
The federal government employs people in every state. In fact, 79% of the federal workforce lives outside of the Washington, DC region. These proposed changes would impact communities across the country. While we fight to protect pensions for state and local employees, we must also fight to protect the pensions of federal employees. At NPPC we believe that every American deserves to retire with security and dignity.