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Budget provides no raise, targets retirement benefits for federal employees

The U.S. Capitol.

STARS AND STRIPES

By ERIC YODER | The Washington Post | Published: February 12, 2018

WASHINGTON — The Trump administration budget proposal targets federal employee pay and benefits while calling for an overhaul of what it called an "increasingly incomprehensible and unmanageable civil service system."

The spending plan released Monday proposes no federal employee raise for January 2019, in contrast to the White House's recommendation last year for an average 1.9 percent increase that took effect last month.

"Across the board pay increases have long-term fixed costs, yet fail to address existing pay disparities, or target mission critical recruitment and retention goals. The Administration therefore proposes a pay freeze for Federal civilian employees for 2019. This Administration believes in pay for performance," one of the budget documents says.

It cites as an example the "within-grade" increases that are paid, up to limits, at regular intervals in the pay systems covering most federal workers. Employees must be performing acceptably to receive them, but those increases are paid "without regard to whether they are performing at an exceptional level or merely passable (they are granted 99.7 percent of the time). The Budget proposes to slow the frequency of these step increases, while increasing performance-based pay for workers in mission-critical areas."

However, the budget does not go into detail on performance based pay, nor on restricting employee appeal rights to address what it calls those who "are simply unable or unwilling to perform at acceptable levels."

"The requirements to successfully remove an employee for misconduct or poor performance are onerous. Employees have a variety of avenues to appeal and challenge actions. . . . This is yet another area where the Federal workforce could benefit from adopting some private sector norms," it says.

President Donald Trump had signaled that proposals were coming on both pay-for-performance and discipline in his recent State of the Union speech, when he called on Congress to give agencies "the authority to reward good workers - and to remove federal employees who undermine the public trust or fail the American people." Preliminary budget documents obtained and released by Sen. Claire McCaskill, D-Mo., had indicated that no raise for 2019 would be proposed.

The budget notes that civil service law was last overhauled 40 years ago and cites independent studies that have decried it as outdated. "It is time to reconsider where that law has succeeded and where it has failed" in areas including what it called an overly "generous benefits package" compared with the private sector's, the government's hiring practices and employee union rights.

The plan repeats what it calls "compensation reforms" from last year's proposal, some of which progressed in the House before falling by the wayside. These include:

- Requiring employees under the Federal Employees Retirement System - more than nine-tenths of the workforce - to contribute more toward their retirement benefits. This would be phased in as one percentage point increases, resulting in a 6 percent of salary increase for most.

- Eliminating cost-of-living adjustments on the civil service annuities of those retired under FERS while reducing the adjustment by a half-percentage point for those retired under the older Civil Service Retirement System.

__ For those retiring in 2019 and later, annuities would be based on the highest five consecutive salary years rather than the current three, and those retiring under FERS below age 62 would no longer receive a supplement that is paid until that age when they can collect Social Security.

Federal employee pay raises are determined in the annual congressional budget process in recent years. Pay rates were frozen in 2011-2013 and raises in the 1-2 percent have been paid each year since; by not acting, Congress has allowed raises recommended by the White House to take effect by default.

Revamping the pay system to put a greater emphasis on performance would require a major legislative effort, however, as would changing retirement benefits and civil service protections.

"Weakening our civil service system and attacking the pay and benefits of federal workers will backfire and leave our country unable to tackle the complex issues we are facing," National Treasury Employees Union President Tony Reardon said in a statement. "Those include threats to public health and security at the ports of entry, a clean environment, cutting-edge research and vital financial protections for American consumers."

"Federal workers shouldn't be hired or fired on the whims of political appointees whose allegiance is to their political party, not the country's best interests. By stripping employees of their due process rights and firing those who reject his politics, President Trump is opening the door for rampant corruption, discrimination, and worker intimidation," said American Federation of Government Employees president J. David Cox Sr.

In addition, for the first time the White House proposed reducing the rate of interest the government pays in a government securities fund, called the G Fund, in the Thrift Savings Plan, a 401(k)-style program for federal employees and military personnel. That idea did feature in prior budget plans prepared by House Republicans that ultimately were not enacted.

"We oppose this proposal," said Kim Weaver, spokeswoman for the TSP, which does not report to the White House. "A change from the existing statutory formula for the G Fund (currently 2.75% annualized) to the 3-month Treasury rate or the 4 week interest rate would drop the current G Fund annualized to 1.46 or 1.43%, respectively. Such a change would make the G Fund inadequate and ineffective from an investment standpoint for TSP participants who are saving for retirement," she said in an email.

Two-thirds of TSP investors have at least some of their money in the G Fund, and of those, four-tenths invest only in that fund, she said.

The budget plan also recommends a study of whether to give employees newly hired after a future date a retirement plan with no annuity component but rather only an enhanced savings program, with current employees having the option to switch into it. That idea, too, has circulated on Capitol Hill in recent years but was not in last year's White House proposal.

The proposal further would revise the way premium costs are shared between the government and enrollees in the Federal Employees Health Benefits Program. Rather than a fixed 72 percent of a weighted average across the entire program, the government share would vary between 65 and 75 percent of a plan's total premium, depending on the plan's quality ratings.

That idea is a twist on long-running proposals to shift to a "voucher" system in which the government share would be set at a fixed dollar amount and increased annually by less than the overall rise in costs in the program.

Another new proposal although not presented in detail, is to combine the separate sick leave and vacation leave benefits for federal workers into one while creating a short-term disability insurance program.

In addition, the budget repeats a proposal to create a nationwide program of six weeks of paid leave for parents of newborn or newly adopted children; last year's proposal would have applied to federal employees along with private sector workers.

It further would create a $50 million fund to test "innovative approaches to meeting critical recruitment, retention and reskilling needs across the Government."

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