Proposed 2021 Budget Would Eliminate Some Benefits
Recently, the White House released its fiscal year 2021 budget proposal. The proposed $4.8 trillion budget makes some significant cuts to federal employees’ benefits and retirement programs.
For many the proposals sound familiar. This is because they have been seen in many past budget proposals. Up to now, none of these have been approved; they are just proposals put forth to start the budget negotiation process, each year, in Washington.
Some of the suggested reductions include;
Eliminate FERS COLA, Reduce CSRS COLA by 0.5 percent
Currently, FERS and CSRS COLAs for annuitants are determined based on formulas tied to the Consumer Price Index. FERS annuitants are somewhat protected from economic effects, because their retirement packages include Social Security benefits and potentially, the Thrift Savings Plan (TSP) in addition to the FERS annuity. Eliminating the FERS COLA and reducing the CSRS COLA payments would reduce both FERS and CSRS annuity benefits. Doing this will bring compensation more in line with the private sector.
Eliminate the Special Retirement Supplement
If a FERS employee retires before Social Security eligibility age, and meets their MRA, they receive a supplement in addition to the FERS annuity. This supplement partially replaces the Social Security portion of the retirement package. This benefit is an “extra” benefit, which is not provided in private sector annuity plans.
Change Retirement Calculation from High-3 years to High-5 years
Federal retirement annuity calculations are based on the average of the Federal employee’s three consecutive high salary-earning years. Private sector pension companies commonly base employee annuity calculations on the five highest salary-earning years. This change would create greater alignment with the private sector.
Reduce the G Fund Interest Rate
The G Fund, an investment vehicle available only through the TSP. Currently, G Fund investors benefit from receiving a medium-term rate of return on what is essentially a short-term security. Making this change would reduce both the projected rate of return to investors and the cost of the fund to the Treasury.
Modify the Government Contribution Rate to Federal Employees Health Benefits Program Premiums
The budget proposal also recommends revising the government’s contribution rate to base it on a plan’s score from the Federal Employees Health Benefits (FEHB) Program Plan Performance Assessment.
The proposal additionally recommends revising the government’s contribution rate to base it on a score from the Federal Employees Health Benefits (FEHB) Program Plan Performance Assessment.
