1.9 Percent Civilian Pay Raise Survives Committee Vote, Now Heading to Full Senate

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The Senate Appropriations Committee on Thursday unanimously advanced a fiscal 2019 spending bill that contains a 1.9 percent pay raise for civilian federal employees, going against President Trump’s proposed pay freeze for next year.

Committee members voted down 29-2 a Republican amendment to strip the pay increase from the Financial Services and General Government Appropriations bill, which will now head to the full Senate. Ranking member Sen. Chris Van Hollen, D-Md., applauded the panel for preserving the small raise.

“Our federal workforce protects our nation, ensures the safety of our food and medicine, delivers Social Security and veterans’ benefits, and carries out countless other responsibilities on behalf of our citizens. Yet instead of treating them like the dedicated and hardworking professionals that they are, the Trump Administration constantly attacks them,” Van Hollen said in a statement. “I was proud to work with my colleagues on both sides of the aisle to secure this modest raise, and I will keep fighting to ensure our federal employees receive the compensation and respect they deserve.”

The House Appropriations Committee did not include any provisions on federal employee pay in its version of the general government spending bill, which effectively endorses the White House plan for a freeze released as part of President Trump’s 2019 budget request. Neither House nor Senate appropriators have acted to advance the Trump administration’s proposed $1 billion interagency workforce fund, pitched by officials at the Office of Management and Budget and the Office of Personnel Management as a way to fund pilot programs that institute pay for performance.

The proposal to raise civilian pay by 1.9 percent falls short of the White House’s pay recommendation for members of the military, which sits at 2.4 percent in 2019. Members of Congress traditionally have pushed for parity in compensation increases for the civilian and military workforces, although they were unsuccessful in enacting pay parity last year.

Some members of Congress also signed onto a bill earlier this year that would provide a 3 percent across-the-board raise for civilian federal employees. Van Hollen said he supports that measure as well.

Now some other key information on how this would affect your pension if you would retire by the end of October.  Schedule your Personalized Federal Retirement Review so that we can explain how this will impact you.

White House Plan for the United States Postal Service – Fix It Then Make It Private

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The Trump administration on Thursday called for the privatization of the U.S. Postal Service, an agency with 600,000 federal employees and whose creation was codified by the Constitution.

The White House made the proposal in its wide-ranging plan to reorganize the federal government. Privatizing the postal service was among 32 distinct ideas it said would help agencies run more efficiently. It first called for reforms to the Postal Service that would create a more sustainable business model, but those changes would be made only for leverage to then sell the entire agency to the private sector. The proposal comes as a task force created by President Trump is working on a series of reforms to put USPS on firmer financial footing, which it will deliver in a report by Aug. 10.

USPS is continuing to expand its delivery network despite a significant decline in mail volume, the administration said, and can “no longer support he obligations created by its enormous infrastructure and personnel requirements.” The mailing agency is required by law to offer its services to every address in the country and has reported losses of more than $1 billion for 11 consecutive years.

“A privatized Postal Service would have a substantially lower cost structure, be able to adapt to changing customer needs and make business decisions free from political interference, and have access to private capital markets to fund operational improvements without burdening taxpayers,” the White House said. “The private operation would be incentivized to innovate and improve services to Americans in every community.”

USPS is caught between its requirement to operate like a business with “the expenses and political oversight of a public agency,” the administration said. Major savings would stem from not just reducing services and more pricing flexibility, but by freeing the agency to “more fully negotiate pay and benefits.” The Postal Service currently negotiates pay and cost-sharing of benefits with labor unions, but is required to participate in federal health care and retirement programs. Its prices are capped and approved by an oversight body, the Postal Regulatory Commission, which the White House suggested could still exist under a privatization model.

Another advantage of a private postal system, the administration said, would be access to private capital. The Postal Service does not currently receive any federal appropriations, aside from money the government spends for specific services.

Privatization could occur either through an initial public offering or a sale to an existing company, the White House said.

It said the reforms proposed by the task force Trump created would be implemented to stabilize the agency and better prepare it for its defederalization. That group has been meeting with stakeholders throughout the postal community for the last several weeks as it readies its recommendations.

The proposal is unlikely to gain any traction in Congress, which is currently working through its own reform packages to help the cash-strapped agency. Lawmakers on both sides of the aisle have spoken to the importance of preserving a federal mailing system to ensure delivery to all Americans, even to areas that the private sector has decided is not profitable to service. Members of Congress representing rural areas have particularly pushed not just the preservation of the Postal Service but an expansion of its offerings.

Lawmakers have not shown an appetite for reducing postal services, let alone privatizing the agency, intervening on a bipartisan basis in recent efforts by the agency to reduce the number of post offices, cut the number of delivery days and consolidate processing plants. The opposition to the proposal was broad and swift.

The National Association of Letter Carriers said the proposal has rendered Trump’s task force effectively moot and ignores the interests of every postal stakeholder aside from private shippers. NALC, along with the other major postal unions, has met with the task force and submitted its ideas for putting USPS on a better path.

“Now that we know that this administration and its Task Force will make recommendations on reforms to achieve OMB’s privatization goals, NALC will work tirelessly with other stakeholders and Congress to oppose this faulty privatization plan every step of the way to preserve this public service,” said NALC President Fredric Rolando.

Art Sackler, who heads the Coalition for a 21st Century Postal Service, a group of large-scale mailers such as Amazon, eBay and the Parcel Shippers Association, said his members were “very, very concerned about the Trump administration’s proposal.

“From our standpoint, privatization is not the answer,” Sackler said. Such a move would “sow confusion” and actually make matters worse for the Postal Service, he explained, by leading to further declines in mail volume. He added that rural communities would be particularly harmed: “No private company is going to want to undertake the level of commitment financially and other ways to really service those areas in the way the Postal Service serves them now as a vital link to the rest of the country.”

The coalition has signed onto legislative efforts underway in Congress, different iterations of which have bipartisan support in both chambers. Sackler called the White House’s efforts to deviate from those compromise plans “frustrating, but not surprising.”

Mark Dimondstein, president of the American Postal Workers Union, said the plan was marked by misinformation.

“Privatizing the Postal Service is not in the public interest and would be nothing more than a raid by corporate pirates on a national treasure,” Dimondstein said.

Unions Seek Court Action to Block Trump Orders

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Unions Seek Court Action to Block Trump Orders

On May 25, 2018, President Trump signed three executive orders on federal employee disciplinary and labor-management policies. In the aftermath of the signing, there was a huge uproar from every nook of the federal employment sector. This week, two employee unions, NTEU and AFGE, went to court to challenge the first two orders.

The first executive order came as no big surprise as The Trump administration has always made it a priority to make it easier for federal agencies to fire underperforming employees. More specifically, the order would significantly reduce the time a worker under investigation for underperformance or misconduct could spend on probation.

The second order slaps unions right in the face. It looks to limit official time use on union matters such as negotiating contracts, settling disputes, and whatnot. In essence, the order states that a federal worker should spend at least 75% of his or her official time doing government work. Currently, Civil Service Reform Act (CSRA) of 1978 offers protection on the use of official time.

According to the Act, the official time use is often up to the negotiations between the relevant agency and unions. That’s where the third executive order comes in. It looks to place the responsibility of renegotiation of official time use with OMB office within the White House.

Challenging the Orders

In what could be the onset on a long-standing court battle, American Federation of Government Employees (AFGE) and National Treasury Employee Union (NTEU) have filed suits against the first two orders in separate federal courts.

Both NTEU and AFGE want the courts to block The Trump’s administration plan to limit the use of official time on conducting union roles to a minimum of 25 percent. In the order, the federal agencies would target in negotiations to permit only one hour per bargaining unit employee per year. And to make matters worse, the use of official time would be subject to the approval of Office of Management and Budget.

National Treasury Employee Union, on its own, filed another suit in the federal district court against the first executive order on federal employee disciplinary process. In its statement, NTEU asserts that limiting the amount of time for an employee to show improvement to no more than 30 days denies every employee the “[fair] opportunity” to demonstrate “acceptable performance” that is guaranteed under the Civil Service Reform Act of 1978.

Whether they’ll overturn the orders remains to be seen. What’s surefire, however, is that it’ll be a lengthy, rocky lawsuit.

OPM Lays Out Proposed Cuts to Federal Retirement Benefits

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Office of Personnel Management (OPM) Lays Out Proposed Cuts to Federal Retirement Benefits

In the wake of Office of Personnel Management Director Jeff Pon has proposed changes to federal employees’ retirement benefits to more align them with that of the private sector.

In a letter to House Speaker Paul Ryan (R-Wis.), Pon proposed four main changes to federal employee retirement benefits that will affect 2.6 million federal retirees and survivors who receive monthly annuity payments:

1) Eliminate the Federal Employees’ Retirement System annuity supplements for new retirees and survivor annuitants;

2) Increase the Civil Service Retirement System and FERS average pay period to five years from three years;

3) Increase FERS employees’ contribution to their retirement to one percent each year until they reach 7.25 percent of basic pay; and

4) Reduce or eliminate retirement cost-of-living adjustments.

The agency expects to save an estimated $143 billion over ten years if all four proposes are enacted.

“The Office of Management and Budget (OMB) has advised there is no objection to the transmittal of these legislative proposals to the Congress and that their enactment would be in accord with the program of the president,” Pon said in the letter.

He asked that Congress give “prompt and favorable” consideration of the proposals.

To learn more, please schedule your free retirement review or contact us today.

Why Going Fed Was Possibly the Best Decision You’ve Ever Made

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You’d be forgiven if you wish you could ditch the feds for the private sector. After all, you have seen how those executives, hedge fund managers, big-time lawyers, and lobbyists live it large with their stately homes in leafy suburbs. Perhaps you are wishing had you switched careers, that could be you.

The chances are that you have heard about your college mates having it good. Talk about big end-year bonuses, stock options, and profit-sharing deals. After all, you are no different. You went to the same college, took similar courses, and graduated the same year.

You are probably wondering: “with my drive, talent, and skills, I could be better off in the private sector.” The truth of the matter is that you are probably not.

That’s right. If you thought you’d do much better outside of the federal sector, think again. At least, that’s what a recent study by the FRB (Federal Reserve Board) has confirmed. What’s more interesting is that more than 12,000 non-fed American employees took part in the study involving a series of surveys and polls.

An incisive look at the study shows that life outside of federal sector isn’t a bed rose:
Approximately 30 percent of adults surveyed indicated that they don’t have a steady income every month. What’s more worrying is that most of them claim that they cannot cover their monthly expenses with their paycheck. Still think your paycheck and federal retirement benefits are not good enough?

Nearly 37 percent of adults responding to the polls said that they don’t have any retirement benefit plan such as IRA, 401K, etc. What a wake-up call, right? As a fed, you can always count on your federal retirement benefits to take care of you in your retirement.

A further 25 percent of participants said that they have neglected medical care because they simply could not afford dental care for their children.

40 percent of those polled indicated that they don’t have sufficient money reserve in their bank accounts or elsewhere. That means 40 percent of Americans working in the private sector don’t have enough cash to pay for emergencies like car repair bill, sudden medical expenses, etc.

Think for a second. With robust federal retirement benefits, the TSP’s 5% match, health coverage when you’re in service and retired, and more, staying in the fed fold is perhaps the best decision you have ever made.

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Will You Make It On A Flatline Pension

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Will You Make it on a Flatline Pension?

Let’s get one thing straight right off the bat, the average life expectancy among American fed retirees is now at a historic high. Thanks to tremendous advancement in health & personal care services, federal retirement benefits, and investment in medical research, it’s not surprising that most of them will live well beyond their mid-80s, if not their 90s. In fact, according to a recent study from School of Gerontology at USC Leonard Davis, if you retire at 65, you can expect to live until the age of 86+.

Interestingly, another study shows that some of the retired Americans today spend more time in retirement than they did in their employment years. So, no matter how you look at it, the chances are that you’ll live longer than your parents or grandparents. That in and of itself can be a blessing or a curse to you depending on your federal retirement benefits. If your income stays steady with inflation over time, that’s well and good. If it doesn’t, you are in for long, bumpy ride.

Trump’s Flatline Retirement

For a long time, FERS retirees have had it good. They’ve lived reasonably comfy lives after giving their best years to serving Uncle Sam. Thanks to Cost of Living Adjustment (COLA) program, the feds retiring would establish a standard of living and make sure it keeps up with year-over-year inflation.

You see, with inflation catch-ups, fed retirees can comfortably make do with income from their federal retirement benefits, especially during periods of high inflations. But, that’s about to change – for the worst! Just recently, President Trump signed a set of three orders, one of which will see the elimination of COLA for ongoing and future feds retiring under FERS.

What does that mean for current federal workers? That means no inflation protection. If you go into retirement on a $1,560/month take-home in 2018, you’d still expect to receive $1,560 every month in 2028. That’s the pinch of a flat-lined retirement you’re looking at if The Trump administration’s proposed legislation goes into effect.

Unlike folks under FERS, those retiring under CSRS would still get cost of living adjustments. However, their COLAs will be set at 0.5% below the actual inflation rise. That means the value of the Civil Service Retirement System annuity will shrink every other year.

Elimination of FERS Supplement

And that isn’t the only bad news contained in the White House’s plan. If you are also planning to retire before the age of 62, you can kiss goodbye to your take-home pay. The elimination of the so-called FERS supplement will deal a massive blow to fed workers such as the police, firefighters, and air traffic controllers who are required by the law to retire by 57.

To learn more about your Federal Retirement Benefits, please request your personalized retirement review today.

Largest Federal Employee Union Sues to Block Official Time Executive Order

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The largest union representing federal employees sued the Trump administration Wednesday over President Trump’s executive order significantly curbing the use of official time by union representatives, arguing the edict violates the First Amendment and exceeds the president’s constitutional authority.

In a lawsuit filed at the U.S. District Court for the District of Columbia, the American Federation of Government Employees said the White House’s Executive Order Ensuring Transparency, Accountability and Efficiency in Taxpayer Funded Union Time Use violates the First Amendment-guaranteed freedom of association and effectively rewrites portions of the 1978 Civil Service Reform Act without the assent of Congress.

Last week, Trump signed an executive order instructing agencies to no longer allow union officials to spend more than 25 percent of their work hours on official time, a practice where union federal employees are compensated for performing representational duties. The order also stipulated that unions not be able to use official time to lobby Congress or to represent employees who have filed grievances or are appealing adverse personnel actions.

The executive order also said that unions must pay rent for the use of federal office space and that agencies should stop covering official time-related travel expenses.

At the crux of AFGE’s lawsuit is the provision of the executive order barring union employees from using official time to represent a colleague in grievance proceedings, which carves out an exception for an employee working on his or her own grievance.

“Employees may not use taxpayer-funded union time to prepare or pursue grievances (including arbitration of grievances) brought against an agency . . . except where such use is otherwise authorized by law or regulation,” the order stated. “The prohibition . . . does not apply to an employee using taxpayer-funded union time to prepare for, confer with an exclusive representative regarding, or present a grievance brought on the employee’s own behalf.”

That, the union argued, is a violation of AFGE’s freedom of association.

“There is no valid basis to distinguish grievances brought by the union [on behalf of the] union or grievances in which a union representative seeks to represent another employee from grievances brought on an employee’s own behalf or instances in which an employee is to appear as a witness in a grievance proceeding,” the union wrote. “By singling out labor organizations for disparate treatment, [the executive order] unlawfully restrains and retaliates against AFGE and its union-member representatives, separately and collectively, in and for the exercise of their rights to expressive association.”

AFGE also argued that mandating the number of hours agencies can authorize for employees’ use of official time improperly amends the section of the 1978 Civil Service Reform Act governing collective bargaining negotiations and establishing official time as a lawful practice. By setting a unilateral cap on the use of official time, the administration violated the provision of the 1978 law that says the practice will be granted “in any amount the agency and the exclusive representative involved agree to be reasonable, necessary and in the public interest,” the union argued.

“[The law] provides that agencies have a duty to bargain in good faith that includes the obligation to approach negotiations with a sincere resolve to reach agreement,” AFGE wrote. “By purporting to fix a preexisting and specific cap on the amount of official time that an employee may use in a fiscal year, and by purporting to add allegedly excess amounts in one fiscal year to the cap calculation for the following year, [the order] is contrary to [existing law].”

In a statement, AFGE National President J. David Cox described the executive order as an attempt by the White House to “score political points” by bashing federal unions and employees.

“This is a democracy, not a dictatorship,” Cox said. “No president should be able to undo a law he doesn’t like through administrative fiat . . . Congress passed these laws to guarantee workers a collective voice in resolving workplace issues and improving the services they deliver to the public every day.”

NTEU Reacts To Recent Executive Orders Targeting Feds

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The National Treasury Employees Union president is calling the three executive orders released by Trump last week a “threat” to the federal workforce and the federal government as a whole.

“The executive orders indicate an administration threatened by workers with rights. Our union has been around 80 years and this is not our first battle on behalf of federal employees,” NTEU Tony Reardon said. “The truth is these orders will disrupt the workplaces of every agency, add red tape and impede the quality work that taxpayers expect and deserve,” he added.

The executive orders, issued on May 25, will 1) limit the amount of time an employee can be under investigation for misconduct and encourages firings for underperformers, 2) states that employees who conduct union activities while on the job must spend at least 75 percent of their time doing government work and 3) calls for the Office of Personnel Management to renegotiate contracts with unions regarding the reporting of official time instead of working directly with individual agencies.

Reardon stressed that the orders will not immediately effect current employees and noted that the collective bargaining agreements currently in place, will remain in effect.

“NTEU believes agencies will need to wait until contracts are reopened or expired before they can try to impose the anti-labor provisions called for by the executive orders,” according to the statement.

Officials Outline Plans to Loosen TSP Withdrawal Rules

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Officials at the federal government’s 401(k)-style retirement savings plan on Wednesday announced how they plan to provide additional flexibility to participants in light of a law signed by President Trump last fall.

The 2017 TSP Modernization Act, enacted last November, will allow federal employees and retirees to make multiple age-based withdrawals from their Thrift Savings Plan accounts and remain eligible for partial withdrawals after they leave government. Additionally, those who have left government would be able to make multiple partial post-separation withdrawals.

At a meeting of the Federal Retirement Thrift Investment Board, which administers the TSP, project manager supervisor Tanner Nohe said employees of the agency have been working on implementation since the new law was signed. They plan to finish implementation by September 2019.

Under current rules, participants in the TSP are allowed one partial withdrawal in their lifetime—either in-service at age 59 1/2 or one after leaving federal service. After that one withdrawal, if a participant wishes to take money out of their account, they must make a full withdrawal, setting up monthly payments or an annuity or take a lump sum.

But Nohe said once the new rules are in place, a participant will be able to make post-separation withdrawals as frequently as once every 30 days without triggering a full withdrawal. Additionally, in-service age based withdrawals will be possible up to four times per year.

“With the change to one withdrawal every 30 days, that’s just a processing rule,” he said. “It’s to prevent mistakes or duplication.”

The law also lays the groundwork to provide participants greater flexibility in changing the amount and frequency of monthly installment payments. Before the TSP Modernization Act, a former federal employee could only receive payments from their account on a monthly basis, and changes to the sum of those payments could only be made during an open season period between October and December.

Nohe said that under the upcoming changes, a participant could elect to receive TSP payments on a monthly, quarterly or annual basis. On top of that, they can change both the amount and frequency of payments at any time of year, and participants can elect to stop and restart installment payments anytime. Retirees also will be able to make partial post-separation withdrawals while receiving regular payments.

Before the rest of the provisions of the new law go into effect, TSP will cease its practice of “account abandonment” as early as August, Nohe said. Under current TSP and Internal Revenue Service rules, when a participant reaches the age of 70 1/2, they must arrange for a full withdrawal and make a required minimum distribution to take out of their account each year.

If someone does not do that, TSP moves all of their holdings into the G Fund—government securities that accrue at a statutorily mandated interest rate—and contacts the participant to inform them of the change. Agency spokeswoman Kim Weaver said that usually prompts the person to contact the agency, at which point they set up how they wish to receive payments and the money is reinvested in other portfolios as they wish.

Nohe said that under the change that will go into effect this summer, that full withdrawal election is no longer required. Instead of abandoning an account, the agency will send a check for the minimum withdrawal payment required by law. Additionally, participants will be able to select whether the required payments come from their standard or Roth account, or some combination of the two.

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Trump Goes After Fed Employees With Executive Orders

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In three executive orders signed May 25, 2018, President Donald Trump took aim at making federal employees easier to fire while cutting back on union time.

The first order fulfils a longstanding goal of the Trump administration in making it easier for the government to fire poor performers from federal positions. The order would limit the amount of time an employee under investigation for misconduct could spend on probation and encourage firings.

The second order specifically targets the use of official time, which allows federal employees to conduct union activities such as representing employees in disputes and negotiating contracts with the agency, by stating that federal employees must spend at least 75 percent of their time doing government work.

Official time use has recently come under fire by both OPM and members of Congress, who say that the rising amount of time spent per employee is a waste of taxpayer money. However, many experts have said that current methods for measuring official time use are likely wildly inaccurate.

The use of official time is protected under the Civil Service Reform Act of 1978, and the amount of official time used by employees within an agency is usually up to the negotiations between unions and the agency.

The third of the executive orders calls for the renegotiation of such contracts, placing the responsibility for the negotiating strategy with the Office of Management and Budget within the White House and requiring that union contracts are posted online.

“These Executive Orders are about protecting taxpayers’ dollars, including those of our dedicated federal employees, and putting those resources to use in the most efficient and effective way possible,” said OPM Director Jeff Pon. “By holding poor performers accountable, reforming the use of taxpayer-funded union time and focusing negotiations on issues that matter, we are advancing our efforts to elevate the federal workforce.”

The American Federation of Government Employees, however, called the orders “hellbent on replacing a civil service that works for all taxpayers with a political service that serves at its whim.”

“President Trump’s executive orders do nothing to help federal workers do their jobs better. In fact, they do the opposite by depriving workers of their rights to address and resolve workplace issues such as sexual harassment, racial discrimination, retaliation against whistleblowers, improving workplace health and safety, enforcing reasonable accommodations for workers with disabilities, and so much more,” said AFGE President J. David Cox Sr. “These executive orders strip agencies of their right to bargain terms and conditions of employment and replace it with a politically charged scheme to fire employees without due process.”

 

New Managment Company for TSP

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The Thrift Savings Plan announced this week that it had awarded a new contract for management of the TSP’s F Fund, a portfolio designed for people on a fixed income. The fund again will be managed by Blackrock Institutional Trust Company, N.A., the firm that already handles both it and every other TSP portfolio.

In a statement, TSP officials said the contract is initially for one year, and the agency has the option to renew for four subsequent years. As of last month, the F Fund held $27.4 billion in assets, including a variety of public and private sectors of the U.S. bond market.

Is it your turn to look at other alternatives of managing your Thrift Savings Plan? Ask us how you can get the best use of your one time in service withdrawal while still working.

Pay and Leave Changes For Some Agencies

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Border Patrol agents assigned to look after their canine colleagues while off duty could soon receive overtime credit for those responsibilities under a bill approved by the House Oversight and Government Reform Committee on Wednesday.

The Border Patrol Agent Pay Reform Amendments Act (H.R. 5896), introduced Monday by Reps. Will Hurd, R-Texas, Martha McSally, R-Ariz., and Filemón Vela, D-Texas, would provide greater flexibility to Customs and Border Protection to compensate agents for canine care, training and other aspects of their jobs.

For instance, those agents responsible for caring for the agency’s dogs would receive an hour of overtime credit for each calendar day they perform those services (see the legislation for details). The bill also increases the amount of advanced training an agent may participate in, and allows accrual of overtime debt when agents exceed the new cap. Additionally, Border Patrol agents would be able to apply compensatory time off for travel toward previous overtime debt, and some agents would be allowed to use alternative work schedules.

Hurd said in a statement that the bill will “streamline” the overtime process and provide border patrol agents with more reliable paychecks each pay period.

“The men and women of Border Patrol have highly demanding jobs and are our most important assets on the front line,” he said. “We must take care of them and ensure that they are being compensated for the grueling hours they put in to secure our borders. These brave agents deserve certainty each time they receive their paychecks.”

The committee also approved another bill that would expand the 2015 Wounded Warrior Federal Leave Act to health care providers in the Veterans Affairs Department. The law gave 104 hours of medical leave immediately to first-year federal employees who are veterans with a service-connected disability rating of at least 30 percent. But due to an oversight in the 2015 law, it didn’t apply to physicians and other health care providers at the Veterans Health Administration, whose jobs are classified under Title 38 and therefore weren’t covered by it. Reps. Steve Stivers, R-Ohio, and Mark Takano, D-Calif., introduced the Veteran Transition Improvement Act (H.R. 2648) nearly a year ago to rectify that.

“Veterans should not have to choose between receiving a full paycheck and receiving care for their service-connected disabilities,” Stivers said. “Unfortunately, current law puts many veterans in this exact position. This legislation will correct this shortcoming in the law to ensure these veterans who have made, and continue to make, incredible sacrifices for our country have the ability to receive care without sacrificing pay.”

How Pay Raises and Retirees COLAs Work

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As administration officials and lawmakers consider an array of proposals that could impact pay and benefits for federal employees and retirees, it’s worth going over the annual process federal agencies undertake to determine potential pay increases for workers, and cost of living adjustments for retired annuitants.

Last week, Office of Personnel Management Director Jeff Pon suggested that a proposal to reduce or eliminate cost-of-living adjustments for federal retirees was justified both because he didn’t “know of any other retirement system that actually pays COLAs,” and because COLAs are based on where a retiree lives. In a statement Monday, an OPM spokesperson clarified that Pon was referring to the fact that annuities are based on workers’ highest three years of total salary, which includes locality pay.

“In his testimony, the director sought to emphasize that locality pay is already factored into an annuitant’s retirement pay, and hence, no future increases based upon where a retiree chooses to live are appropriate,” the spokesperson wrote. “The director further outlined that the private sector trend has been to offer a retirement compensation package that does not include annuity COLAs, and that federal service annuities should follow suit and mirror this trend.”

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Each year, deliberation over federal employee salaries begins with the release of the president’s budget for the upcoming fiscal year, which is typically released in February. That document includes the White House’s proposal for an across-the-board raise (or lack thereof) for both civilian federal employees and members of the military.

This year, President Trump proposed a pay freeze for civilian workers in 2019. Congress has the power to overrule the president on across the board pay increases, although in recent years it typically has deferred to the White House.

By the end of August, the president must reaffirm his compensation proposal for the following calendar year by issuing an alternative pay plan declaring that a so-called “economic emergency” exists, preventing a much larger automatic formula-based pay raise that would be triggered under the 1990 Federal Employees Pay Comparability Act.

Last year, Trump’s plan raised pay by 1.9 percent—an increase of 1.4 percent in base salary with an average increase of 0.5 percent in locality pay. Without the president’s intervention, the locality pay increase would have averaged 26.16 percent, costing the federal government $26 billion.

In December, the President’s Pay Agent must issue a report finalizing the White House’s planned pay increase. That report also formally implements previously approved changes and additions to the locality pay area program. Last year, the pay agent confirmed the overall 1.9 percent pay increase, and while it reaffirmed previously approved regional additions to the list of locality pay areas, it delayed implementation until 2019.

The process for determining cost of living adjustments for retirees is much simpler. According to OPM’s website, both Federal Employees Retirement System and Civil Service Retirement System COLAs are based on the annual third quarter change in the Labor Department’s Consumer Price Index for urban wage earners and clerical workers.

For CSRS retirees, the percentage change in CPI is applied directly to their monthly annuity. FERS annuitants receive a COLA equal to the percentage increase in the average CPI-W for the third quarter of the current year over the average CPI-W for the third quarter of the last year in which a COLA became effective, provided it is 2 percent or less. If the CPI-W increases between 2 and 3 percent, the COLA is 2 percent. And if the CPI-W increases by more than 3 percent, the COLA is that increase minus 1 percent.

Unlike across-the-board pay increases for current employees, the size of COLAs for retirees do not vary based on where they live. Changes to which regions’ current federal employees receive additional compensation based on location are proposed by the Federal Salary Council, a board made up of federal officials and representatives of unions and other employee groups. Those recommendations are then acted upon by the President’s Pay Agent, and if approved, the pay agent sends them to OPM for implementation via the standard rulemaking process.

Last year, no new locality pay areas were proposed, because the salary council was not reconstituted until December. The President’s Pay Agent, hamstrung by the lack of a permanent OPM director, also deferred action on locality pay areas recommended by the salary council in 2016. OPM now plans to conduct a rulemaking process for already approved locality pay areas—Birmingham, Alabama; Burlington, Vermont; San Antonio, Texas; and Virginia Beach and Norfolk, Virginia—as well as new areas recommended in April: Corpus Christi, Texas, and Omaha, Nebraska.

Thrift Savings Plan

How Will You spend Down Your TSP Account

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Have you started to think about how you’re going to use your Thrift Savings Plan investments once you retire from federal service? Are you already retired? If you’re among the many people who have accumulated a small fortune, what are you going to do with it?

Many federal employees have used some of their retirement savings during their career by borrowing from their accounts using the TSP loan program. According to recent statistics, more than 250,000 TSP loan transactions are processed every year. In addition, more than 120,000 in-service withdrawals are processed for financial hardship as well as age-based withdrawals for employees age 59 ½ and older. Over the past few years, only about 35,000 separated participants per year have initiated monthly payments from their TSP accounts. Meanwhile, the Office of Personnel Management processes about 100,000 federal retirement claims every year.

Over the years, you’ve had to decide how much of your salary to save in the TSP and in which funds to invest those savings. Considering the TSP had a balance at the end of January of $559 billion, the 5.2 million TSP participants have done an amazing job of accumulating retirement assets. More than 90 percent of all FERS employees are actively participating in the TSP. The Life Cycle funds represent more than 20 percent of total TSP assets, and allow simple diversification across the C, G, F, S, and I funds by allocating assets according to a time horizon based on when you intend to start using the funds. The size of the C Fund now matches the G Fund, with each fund holding a balance as of the end of January of approximately $205 billion.

If you’re nearing retirement, you face some decisions about how to use this important piece of your retirement benefit. Will you choose a monthly payment to supplement your federal retirement benefit and Social Security? Are you going to purchase a life annuity from MetLife, will you take payments directly from your account balance, or will you do a qualified rollover to another IRA Annuity that will offer more income, more features than the typical MetLife Annuity?  Will you continue to allow the account to grow and decide later on how to draw on your funds? Are you planning to “peck” at it as needed for major expenses that come up along the way? Have you considered how you will continue to manage your wealth of savings once you begin to spend this valuable asset? Are you worried about running out of money at some point? These are important questions to consider as you plan your transition to full retirement. That’s one area we believe we can help guide you in making the right decision.  Request your Retirement Review and TSP Analysis (see link below) to see what’s best for you.  For example, we have Joe, retired with about $223,000  and since the rollover, seven years ago, H-E-B has taken out over $98,000 but still has an account balance today of $199,840.  How’s that’s for a return and still at no risk at all of ever losing principal.

Here are three questions you need to ask yourself.

1.  Do you like the idea of never losing your principal due to a down market?

2.  Do you like the idea of having a Guaranteed income you can never outlive, or that will pay for the rest of your life or your spouse life?

3.  Would you like to have the option to leave more of your principal for your children or grand-children, or the flexibility to pull more of your account balance as the years go by as you choose too without ANY penalty?

if you answered yes to any or all of these questions, we have a solution for you.

A few weeks ago I provided an update on the TSP Modernization Act changes that are slated to go into effect by November 2019. They will provide more withdrawal flexibilities for TSP participants, allowing them to take partial withdrawals, change the amount of monthly payments, and choose whether withdrawals should come from a traditional TSP account or a Roth account.

The Employee Benefits Research Institute released an issue brief on how people spend their retirement savings. The study was limited to retirees from private companies with 10 or more employees. Among its findings:

  • Within the first 18 years of retirement, those with $500,000 or more saved spent down 11.8 percent of their accumulated assets. Those with less than $500,000 saved spent about a quarter of their savings.
  • While some retirees do spend down most of their assets in the first 18 years following retirement, about one-third of all sampled retirees had increased their assets over that period.
  • Individuals with a pension were much less likely to have spent down their assets than those without pensions. In the first 18 years of retirement, the assets of retirees with pensions only went down 4 percent. For those without pensions, the figure was 34 percent.

According to the report, retirees face several factors—including uncertainties about life span, medical expenses, and market returns—that cause many of them to spend their retirement assets slowly.

Those covered by the Federal Employees Retirement System have the traditional “three-legged stool” of a retirement benefit (a form of pension), Social Security and retirement savings in the TSP. Some FERS retirees are currently living on only one or two of those legs, while others have left federal employment, but are not fully retired. In the Civil Service Retirement System, by contrast, many people retired and lived on their federal retirement benefit alone long before the TSP was available.

The TSP has been around for more than 30 years. Until recently, the focus of its participants has been on accumulating retirement assets. Now many of them are thinking about how and when to spend them. They’ll soon have more options for doing that, but that will mean they may need additional education and resources to be confident that their life after retirement will be financially comfortable for as long as they live.

Here are some tools from the TSP to help you as you assess your withdrawal options:

You can also  Request your free personalized review a TSP Analysis,

Will Proposed Compensation Changes Help Or Hurt Federal Retirement

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Recent proposals from the Office of Personnel Management and the Office of Management and Budgetwould freeze federal pay for a year, and decrease federal employee compensation by increasing the employee contribution to the Federal Employees Retirement System by one percent per year until it reaches 50 percent.

They would also eliminate cost of living adjustments (COLAs) for FERS retirees, and reduce CSRS retiree COLAs by 0.5 percent. They would eliminate the FERS Special Retirement Supplement for those employees who retire before Social Security eligibility age, calculate employees’ annuity based on the “High-5” salary years instead of “High-3” salary years, and reduce the “G” fund interest rate.

Needless to say, those proposals have generated a lot of controversy. Some critics argue they have not gone far enough, while others say federal workers have carried a disproportionate share of budget cuts in recent years.

The proposals do not appear to have enough support in Congress to pass, so any discussion of them might appear to be academic. On the other hand, the proposals are not going away and we should expect to see them surfacing again and again.

Federal vs. Private Sector

The reason proposals such as these are popular with some folks is that federal benefits are typically more generous than what rank and file employees in the private sector receive. Combined with greater job security, many argue that the benefits more than offset the lower pay that many higher graded employees and those in in-demand occupations receive relative to the contemporaries in the private sector.

Is that true? And, if it is, should that drive federal compensation decisions? I am going to try to unpack the issue a bit and look at some of the arguments and where I think this debate will finally land.

Overpaid or Underpaid?

Let’s start with the basic question regarding federal pay relative to the private sector.

There are more than two million non-postal federal employees. Some people will tell you they are grossly overpaid, while others argue they are underpaid. Neither of those broad-brush assertions is true.

Federal pay is a bit like Goldilocks’ porridge. Some is too low, some is too high, and some is just right. The biggest problem is that we are not using any reliable process to determine which jobs are in each category.

For the most part, federal pay decisions lump different types of jobs into grades with no consideration at all of how such jobs might be compensated in the private sector. That approach invites the overly broad “everyone is overpaid” and “everyone is underpaid” arguments, because the pay decisions themselves are overly broad.

If federal pay decisions were based more on data about jobs and how they are compensated in the labor market, it would be much more difficult to make sweeping statements about federal pay. The political debates regarding the federal workforce would have to stand on their own merits, rather than using federal pay and benefits as a proxy.

Some people will assert that federal pay should not be compared to the private sector, because the government is different. The part about the government being different is true, but the reality is that the federal government is an employer that competes for talent in the same labor market as the private sector, not-for-profit organizations, and academia. There has to be some way of evaluating how the government pays its employees, or the government cannot effectively compete for talent. Because public service is a public trust, it is also important for government to not overpay its employees using the tax dollars of people who are not paid so generously.

Recruiting Talent

When we look at the current proposals, one statement I have heard repeatedly it that these proposals would result in government having trouble recruiting the right talent. The pay freeze proposal might serve as a deterrent to applicants in high-demand jobs, but I do not believe the retirement proposals will harm recruiting.

Particularly when we are looking at younger applicants, retirement planning is not high on the list on priorities. As long as the government offers the Thrift Savings Plan with a decent match, the retirement benefits will be adequate to compete in a market where defined benefit plans such as the FERS annuity are almost extinct.

Do I think the government should be an average employer? That is another question for another post.

That does not mean these proposals would have no impact on recruiting. The fact that they are, in effect, changing the conditions of employment for people who have already been hired may make some applicants think twice about applying for federal jobs. On the other hand, the private sector does that often, based upon the changing business environment.

Job Stability

One additional factor that has to be taken into consideration is the stability of federal employment. Federal jobs are remarkably stable. Federal employees do not have to worry about their employer going broke, merging with someone else, or deciding to drop a line of business.

The number of people separated by reduction in force in fiscal 2017 was 135. Out of 2.1 million. That extraordinary stability of employment has to be factored in somehow.

Conclusion

OPM’s recent proposals are not radical changes. In fact, if the proposals had been to make prospective changes that would affect only new hires, the reception on the Hill might have been more positive. It is far easier to change the rules for people who have not been hired than it is for those who are on the payroll today and who have made career decisions based upon today’s rules.

Even though these changes are not likely to pass any time soon, we should not expect them to go away. Until federal pay is brought into the 21st century and based on comparisons of jobs to similar jobs in the private sector, the debates will continue.

Now if you have two months to ten years until your retirement, it’s a good idea to have a Retirement Review to help Plan, Prepare and Execute a Plan for a better Retirement

OMB says it cannot locate any public comments on its reorg

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Although the Office of Management and Budget asked for public input on its restructuring efforts, it now says it cannot find any such comments and one organization filed a lawsuit in response.

After President Trump signed an executive order in March of last year for the OMB to reorganize the agency by eliminating unnecessary programs, Director Mick Mulvaney posted a video soliciting ideas and input from the public—also a part of the order.

But, according to the Public Employees for Environmental Responsibility—a nonprofit group of government workers that aim to further environmental laws and values—after the public comment period ended, the OMB website boasted that it had received more than 100,000 comments, but the statement has since been deleted and the agency now claims in a lawsuit, filed by PEER, that it has no record of receiving any comments.

“How could they not locate 100,000 comments?” PEER Executive Director Jeff Ruch, said in a statement, adding, “The White House call for public involvement in reforming government seems to have been merely a cynical stunt.”

Ruch added, “We will likely never know if the public registered strong preferences supporting or exactly opposite what the Trump team has done.

View the PEER statement, as well as OMB’s response to the lawsuit here.

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GSA Announces $2.5 Billion Modernization of Federal Payroll and Leave Systems

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The General Services Administration on Thursday issued a pre-solicitation notice seeking contractors to upgrade the payroll systems serving 2.2 million civilian federal employees.

Companies holding GSA IT Schedule 70 contracts, SINs 132-40 and 132-51, will be eligible to compete for one or more blanket purchase agreements off of which agencies can order services, according to the May 17 notice. The blanket purchase agreements will last for 10-13 years and are expected to have a ceiling of more than $2.5 billion.

In addition to modernizing payroll services, the “NewPay” initiative will encompass work schedule and leave management systems. The goal is “to shift operations and maintenance of payroll functions to innovative commercial solutions using the Software as a Service (SaaS) model,” GSA said in its announcement of the pre-solicitation notice. “This will enable agencies to focus more resources on core mission priorities and deploy modern and secure work schedule, leave management and payroll solutions to support a modern workforce.”

Agencies’ payrolls were last consolidated during the George W. Bush administration, which narrowed 26 payroll providers down to four, saving more than $1 billion over 10 years, GSA said. The latest modernization initiative fits with the President’s Management Agenda cross-agency priority goals of sharing quality services and IT modernization, GSA noted.

“NewPay potentially benefits every federal civilian employee in the executive branch, including the civilian workforce within the armed services and quasi-federal agencies,” GSA stated. “NewPay will provide user friendly self-service options, future cost-avoidance and increased efficiency in a secure environment.”

The pre-solicitation notice will close on June 1.

Health benefits

Changes Are Coming to Federal Health Plans

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News about changes to retirement and insurance benefits always gets the attention of employees who are planning to retire as well as those who already have. Sometimes the news is good, sometimes not.

There’s already news about the 2018 insurance open season that is causing some buzz, even though open season doesn’t start until Nov. 12 (and ends on Dec. 10).

Let’s look at some of the changes on the horizon.

Supplemental Dental Insurance

This change will be of particular interest to military retirees and family members. Delta Dental is no longer going to be available for military retirees under the TRICARE Retiree Dental Program after Dec. 31, 2018. That’s the bad news, but the good news is that retired service members and their families will be eligible to participate in the Federal Employees Dental and Vision Insurance Program. Many military retirees already have the option to participate in FEDVIP due to civilian employment, but there are those who have stayed with the TRDP even though they’ve had access to FEDVIP.

Delta Dental has been the TRDP dental insurance provider and is also available under FEDVIP in a high and standard option. But even though the benefit goes by the same name, the coverage is different. I compared the cost and benefits of Delta Dental under the TRDP program to the Delta Dental plan offered under FEDVIP. Here are some of the things I found:

  • The monthly premium for TRDP is priced regionally, like FEDVIP. For example, the TRDP 2018 premium along the Gulf Coast of Florida is $32.25 for self only, while in the Washington, D.C. metro area the cost is $40.60.
  • The monthly premium range for the FEDVIP Delta Dental standard option PPO is $18.81-$26.59 (self only), $37.59-$53.17 (self plus one), or $56.40-$79.76 (self and family), depending on where you live.
  • The monthly premium range for the FEDVIP Delta Dental High Option PPO is $36.27-$53.95 (self only), $72.54-$107.92 (self plus one), or $108.81-$161.87 (self and family), depending on the region.
  • Both the TRDP and FEDVIP plans provide 100 percent in-network coverage for preventative and diagnostic dental exams and x-rays. They both provide less generous coverage when using out-of-network providers.
  • The FEDVIP high option plan has a $30,000 maximum (no deductible in-network) in-network allowance, while the standard option only allows $1,500 per person (no deductible in-network) and the TRDP has a maximum allowance of $1,300 per person (with a $50 deductible).
  • The TRDP plan covers 80 percent of basic restorative services (such as fillings and periodontal maintenance) while FEDVIP standard covers 55 percent and the high option covers 70 percent
  • Major dental expenses such as crowns, bridges and implants are covered at 50 percent in-network for TRDP and FEDVIP high option, while standard option FEDVIP covers 35 percent of major expenses.
  • TRDP provides only $1,750 lifetime orthodontic maximum while FEDVIP standard allows $2,000 and high option has a $3,500 allowance.

By the way, there are nine other FEDVIP plans to choose from, and some have a standard as well as high option. There are plan comparison tools available at Benefeds.com. The new premiums for 2019 won’t be announced until October and the coverage will be effective on Jan. 1, 2019 for military and civilian retirees and on Jan. 6, 2019 for most civilian federal employees.

Health Plan Options

Another change brewing for the upcoming open season is being touted by the Office of Personnel Management as adding further flexibility to the Federal Employees Health Benefits Program. It allows all FEHBP plans to offer three plan options (such as high, standard and value) or two plan options and a high deductible option.

In the April 27 Federal Register, OPM notes that FEHBP currently contracts with 83 health plan carriers that offer a total of 262 health plan options. Historically, about 18,000 FEHB participants switch health care plans in any given year.

To understand the impact of the change outlined in the Federal Register, it is important to note that there are four types of FEHBP plans: service benefit, indemnity benefit, employee organization and comprehensive medical.

Here’s how these four types of plans are defined in Section 8903 of the U.S. Code (I’ve simplified this as much as I could, but bear with me, there is a reason you need to know this):

Service Benefit Plan: “One government-wide plan, which may be underwritten by participating affiliates licensed in any number of states,offering two levels of benefits, under which payment is made by a carrier under contracts with physicians, hospitals, or other providers of health services.” Blue Cross Blue Shield is the one service benefit plan under FEHBP. Blue Cross offers a standard option and a basic option. Its market share across the United States increased between 2000 and 2008, the period immediately following the introduction of the basic option—a shift away from the original high and standard options.

Indemnity Benefit Plan: “One government-wide plan, offering two levels of benefits, under which a carrier agrees to pay certain sums of money, not in excess of the actual expenses incurred, for benefits.” In a 2008 FEHBP letter to carriers, OPM noted that Aetna had served as the carrier for the governmentwide indemnity benefit plan from the establishment of FEHBP in 1960 until the end of 1989. Since 1990, there has been no carrier for the indemnity benefit plan.

Employee Organization Plans: “Employee organization plans which offer benefits…which are sponsored or underwritten, and are administered, in whole or substantial part, by employee organizations…which are available only to individuals, and members of their families, who at the time of enrollment are members of the organization.” There are currently eight employee organization plans in FEHBP: GEHA, AFSPA Foreign Service Benefit Plan, APWU, Compass Rose, SAMBA, NALC, Mail Handlers Benefit Plan and Rural Letter Carriers Benefit Plan. Aetna also operates three employee organization plans as well. Under the statute, these plans have not been restricted to only two levels of benefits.

Comprehensive Medical Plans: These plans, which are also not restricted to only two levels of benefits, are broken down as follows:

  • “Group-practice prepayment plans offer health benefits of the types in whole or in substantial part on a prepaid basis, with professional services provided by physicians practicing as a group in a common center or centers.”
  • “Individual-practice prepayment plans offer health services in whole or substantial part on a prepaid basis, with professional services provided by individual physicians who agree to accept the payments provided by the plans as full payment for covered services given by them.”
  • “Mixed model prepayment plans which are a combination of the type of plans described [above].”

United Healthcare and Kaiser Permanente are examples of comprehensive medical plans. Aetna operates three employee organization plans and seven comprehensive plans, providing coverage to 585,000 federal employees, annuitants and their eligible dependents—more than 7 percent of the entire FEHBP population. In 2004, Blue Cross standard option had 1.99 million enrollees, and its basic option had 180,000 enrollees. In 2017, the Blue Cross standard option had 1.57 million enrollees, and its basic option had 1.03 million enrollees, representing a 20 percent enrollment gain.

By contrast, the HMOs participating in FEHBP had a combined enrollment of 1.024 million enrollees in 2004, and 655,000 in 2017, representing a 36 percent enrollment loss. Blue Cross stands to benefit from the rule change, because it is the only plan restricted to two plan options under the federal statute.

Why does this matter? Currently GEHA standard option holds the position of being the default FEHBP plan option. This means that if an FEHBP participant loses coverage under their current plan and doesn’t select a new plan, they will be placed by default into GEHA standard option. According to comments on the rule offered by GEHA, by allowing Blue Cross the opportunity to create a third service benefit plan option—with a probable goal of capturing default carrier status—Blue Cross could get even greater market share and economy of scale. That could drive some carriers out of FEHBP and create barriers to entry to others.

Blue Cross, in its comments, said the company backs “regulatory actions such as the proposed rule…which promote competition while maintaining a level playing field.”

OPM, in a response to all the comments on the rule, said, “All carriers have the ability to adjust their premiums, focus on quality, recruit providers and promote their brand to compete with the largest insurer in the FEHB Program. That some carriers attract more enrollment than others is not evidence of an anti-competitive environment.”

What do you think?

benefits slashed

Republican Congressman Opposes OPM’s Proposals to Cut Retirement Benefits

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Congressman Mike Turner (R-OH) wrote a letter Wednesday to the Director of Office of Personnel Management  stating his strong opposition to OPM’s recommendation of cutting benefits for federal workers, over 30,000 of which reside in Congressman Turner’s district.

“I am writing in strong opposition to your letter sent on May 4, 2018 to Speaker Paul D. Ryan in which you recommended legislative proposals seeking to cut benefits for federal workers,” Turner wrote.

OPM’s legislative proposals covered four areas, including:

  • elimination of the Federal Employees Retirement System (FERS) special annuity supplements
  • use of high-five rather than high-three average salary to calculate federal retirement annuities
  • increase in employee retirement contributions for employees covered by FERS
  • reduction or elimination of retirement cost-of-living adjustments (COLAs)

“Despite their hard work and dedication, few groups have been asked to sacrifice more than federal employees,” Turner said. “Since the start of the Great Recession in 2008, federal workers have foregone $182 billion in the form of pay and benefit cuts. They have suffered a three year pay freeze, followed by two years of one percent pay increases that were well below the recommended level. In addition, employees hired since 2012 have seen significant employee contribution increases mandated for their retirement accounts. Moreover, approximately 750,000 workers lost up to eight days of pay because of the devastating impacts of sequestration in 2013.”

“Worse, these proposals would affect all current retirees and employees, rather than making changes on a prospective basis,” wrote Turner.  “This breaks a promise to current federal employees and retirees. We should not arbitrarily make changes to policies that families have planned their lives around, particularly when it affects current retirees with limited ability to make up for unanticipated reductions in estimated income.”

Turner stated that the Dayton region is home to over 30,000 federal employees — with more than 27,000 at Wright-Patterson Air Force Base and 2,200 federal employees at the Dayton VA Medical Center.

OPM Chief Defends Pay Freeze as a Chance to ‘Right-Size’ Compensation Across Occupations

By | Benefits, Retirement | One Comment

Two of the federal government’s top management officials on Wednesday defended proposals to freeze civilian workers’ pay in 2019 and to implement myriad cuts to retirement benefit programs.

At a civil service reform town hall hosted by the nonprofit Partnership for Public Service, Office of Personnel Management Director Jeff Pon defended the Trump administration’s plan to freeze the pay of all civilian federal employees in 2019 as needed to “collect data” on compensation and as a chance to “right-size” the pay for different government occupations.

“I’m not one for a peanut butter approach for how to compensate people,” Pon said, referring to across-the-board pay increases. “This is a chance to ask, ‘Hey, are we overpaying some occupations and underpaying others?’ Then we can try to right-size the underpaid jobs, and then the overpaid ones will take care of themselves through attrition.”

Pon and Office of Management and Budget Deputy Director for Management Margaret Weichert discussed their visions for civil service reform, including overhauling the government’s compensation structure and providing greater retirement flexibility for feds to improve the hiring process and recruit the next generation of public servants. Weichert touted the White House’s proposed $1 billion interagency workforce fund, which would fund pilot programs for innovative personnel systems.

“There’s a real competitive market for talent, and we need to apply much more market-driven competitive realities,” she said. “We have to take a total compensation perspective, and take a lot of data from different sources. Today, it’s much more than just looking at pay. In the marketplace, people look at total compensation, all the things a job package has to offer, including retirement, job security and other elements.”

But shortly afterward, Pon defended a series of cuts to federal employee retirement programs, which he advocated in a recent letter to House Speaker Paul Ryan, as not part of the compensation discussion.

Among the proposals are the elimination of the Federal Employees Retirement System supplement for employees who retire before age 62, changing the basis of retirees’ defined benefit annuity payments from their highest three years of salary to their highest five years and a multi-year increase of the amount employees contribute to FERS. The plan also would eliminate cost-of-living adjustments for FERS participants and reduce COLAs for Civil Service Retirement System retirees by 0.5 percent.

“Those are annuities, not compensation,” Pon said. “[These] things, like the change from high three to high five, are very modest proposals. We want to restructure the whole compensation model for the federal government, and there’ll be a lot of people who are relieved, because we’ll be grandfathering in a lot of different types of things.”

While some proposals would only impact workers going forward, the changes to COLAs, as proposed, would impact “current and future retirees,” Pon said in his letter last week.

Pon said the government must adjust how it provides retirement to adapt to a workforce that is far more likely to switch jobs frequently, rather than stay in one organization for decades. And federal workers in good standing should be able to be brought back to the workforce outside of the competitive hiring process, if they temporarily leave an agency to work in the private sector.

“We’d like to provide defined contribution programs, and we want to make sure the federal employee can own their investment, take it with them, and come in and come out of government,” he said. “I don’t believe we should look at it as having a federal job for 30 years, retire and then have a lifetime retirement anymore.”

Weichert said that part of any effort to recruit the next generation of federal workers has to be how the jobs are pitched, which she said dovetails with her desire to counter the “Drain the Swamp” rhetoric popularized by President Trump.

“In government, we have the best purpose and the best mission: we’re here, serving the American people and making lives better,” she said. “These are the best jobs, and we’re working to make sure you can make a difference in doing these jobs . . . It’s about telling stories not only about what our people are doing, but more importantly, how are we helping Americans and how we’re actually doing the mission.”

To learn more about your retirement benefits, please visit our contact us page to request your personalized retirement review.