As part of the GOP’s effort to pass legislation under budget reconciliation to extend and expand tax cuts for the wealthy first implemented during President Trump’s first term, the panel’s leadership unveiled plans to reduce federal spending by $50 billion, mostly by making federal workers’ contribute more toward the defined benefit portion of their retirement benefits, while simultaneously changing the formula to calculate their monthly annuity payment to be less generous.
Included in the measure is a provision that would require federal workers hired before 2014, who were previously held harmless by Congress’ last foray into reducing federal workforce benefits more than a decade ago, to pay 4.4% of their basic pay toward the Federal Employees Retirement System. And it requires new hires to elect between waiving their civil service protections, becoming at-will employees, or paying an additional 5% of their basic pay toward their FERS annuity.
The legislation also changes the formula for calculating a federal retiree’s FERS annuity from one based on the average of their highest three years of salary to one based on the highest five years, and it eliminates the FERS supplement for employees who retire before Social Security kicks in at 62, though exceptions exist for jobs with a mandatory retirement age like federal law enforcement and air traffic controllers. Both provisions would impact all federal workers who retire after the bill’s enactment.
