Pending retirement reductions resurface shadows over postponed departures
The House Oversight and Government Reform Committee has voted on the Republicans' budget reconciliation legislation this week, which has caused a stir among federal employees. The proposals, aimed at reducing spending to fund tax cuts for the wealthy, expanded defense, and immigration enforcement, include changes to federal employee retirement benefits that have raised concerns.
One of the most contentious changes is the elimination of the Federal Employees Retirement System (FERS) supplement for federal workers who retire before Social Security kicks in at age 62. John Hatton, staff vice president for policy and programs at the National Active and Retired Federal Employees Association, has criticized this move, stating that it's the wrong thing to do, particularly for those who have already earned and relied on the FERS supplement in their financial retirement plans.
The FERS supplement, designed to replicate what a federal retiree would receive from Social Security once they turn 62, would be eliminated effective immediately upon the bill's enactment. This change could reduce a federal employee's retirement by 32%, according to one federal employee who expressed their concern. Hatton further stated that the proposed change would have a real impact on those fully retiring, but less so on those planning to return to work as their FERS supplement would be decreased by their earnings in their next job.
Moreover, the legislation includes plans to require federal workers hired before 2014 to contribute more to their defined benefit annuities. All FERS enrollees would be required to contribute 4.4% of their basic pay each paycheck toward their pension. New hires would be required to elect between paying an additional 5% of their salaries toward their retirement benefits or waiving their civil service protections and serving at-will.
The elimination of the FERS supplement has caused panic among federal workers who accepted the deferred resignation program. Several federal workers are adjusting their retirement date to protect their benefits due to this proposed change. Hatton also mentioned that the elimination of the FERS supplement would result in a significant decrease in a retiree's post-employment income, potentially amounting to $100,000 or more over a five-year period for those with larger retirement funds.
The proposals revive concerns about the Trump administration's deferred resignation program, specifically the 'fork in the road' option. There are exceptions for employees in jobs that are subject to mandatory retirement ages, like law enforcement officers and air traffic controllers. However, for many federal workers, these changes could mean a significant reduction in their retirement income, leading to uncertainty and worry.
As the legislation moves forward, federal employees and their advocates will continue to closely monitor the situation and voice their concerns about the potential impact on their retirement security.
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