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.”

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