Changes to federal benefits: So close and yet so far

Although President Clinton vetoed the budget reconciliation bill, the House and Senate have reached a meeting of the minds on federal employee benefit issues. In fact, it is likely that those portions of the separate House and Senate reconciliation bills will resurface, either by themselves or as part of another package in the near future.

Under both reconciliation bills, federal employees, including employees of the U.S. Postal Service, would have paid an additional .25 percent toward their retirement fund in 1996, .15 percent in 1997 and an additional .10 percent in 1998 for a total increase of .5 percent. In addition, government agencies would have been required to make an extra 1.5 percent contribution to the Civil Service Retirement System on behalf of employees, beginning this year. No agency increase in payments to the Federal Employees Retirement System was included because agency contributions to FERS are already what they should be for FERS to be on financially sound ground. The increase in employee contributions, however, applies to CSRS and FERS employees.

Change Ahead for Congress?

The reconciliation bills also called for changing the congressional retirement system so that its benefits would be the same as those for federal employees. Under the plan, congressmen and congressional staff members would keep what they have built up in terms of benefit entitlements under the old formula; the new formula would apply for years of service after Jan. 1, 1996.

Not included in either bill was an earlier proposal by the House to cap government contributions to the Federal Employees Health Benefits Program (FEHBP) and to phase in a new formula for calculating retirement benefits based on a high-five calculation instead of a high-three calculation. Also missing from the legislation was a proposal that the House had put forth to keep the Office of Personnel Management out of the business of telling FEHBP carriers what levels of benefits to offer feds.

That's not to say these proposals are dead and will not surface in a new bill. Whether they ever see the light of day depends a lot on whether the budget gets balanced.

Two other proposals that also could not be agreed upon included a plan to allow feds to have optional medical savings accounts and another that would have required feds to pay prevailing commercial rates for parking.

The changes agreed to by the House and the Senate are not as painful as they might have been, but they will hurt. According to the Federal Managers Association, the provision to increase retirement plan contributions by half a percent over a three-year period will cost the average fed about $1,300 over seven years.

On the other hand, if the formula for calculating retirement benefits were changed from its present high three to a high five, the Congressional Budget Office estimates that the average worker would lose about $13,200 over his lifetime.

Well, there you have it—another "it could have been worse" scenario. Frankly, I don't buy that; just because things could be worse is not a reason to rejoice.


Bureaucratus is a retired federal employee who is a regular contributor to Federal Computer Week and the author of Bureaucratus Moneyline, a personal finance newsletter for federal employees, available by subscription on FCW's Web page at For more information, contact Bureaucratus at [email protected]


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