Workforce

Trump's budget takes aim at federal retirement

Shutterstock image: workforce organization chart. 

President Donald Trump's budget proposal identifies almost $150 billion in savings over 10 years by slashing federal employee benefits, but feds and their unions are crying foul.

In fiscal year 2018, the proposal reduces federal retirement benefits by more than $3.3 billion, leaving employees to pick up the tab with an additional $3.2 billion in retirement contributions.

The administration claims the cuts will lead to $76 billion in savings from federal retirement benefits and outlines another $72 billion from increases in required employee contributions.

The administration budget also changes the pension calculation, by averaging an employee's five highest salary years, as opposed the current practice of averaging the three highest.  This would have the effect of reducing pension benefits. Additionally, the budget eliminates annual cost-of-living adjustments under the Federal Employees Retirement System for current employees and for the older Civil Service Retirement System, which covers many current retirees.

The cuts follow a three-month hiring freeze as part of Trump's early actions to fulfill campaign promises to reform the federal workforce.

Mick Mulvaney, director of the Office of Management and Budget, defended the cuts in a May 23 press conference.

"Simply put, we try and make federal retirement closer -- closer to the private sector.  So we've increased the contributions that they make to their 401(k) programs," Mulvaney said. "It's the right thing to do on behalf of the taxpayers," he said.

Mulvaney pointed out that federal retirees will continue to enjoy cost-of-living adjustments in their Social Security benefits.

Rep. Gerry Connolly (D-Va.), who represents a large number of federal workers and contractors and has been a critic of Trump's early workforce actions, called the budget a "dystopian vision" and "yet another attack on federal employees and retirees by cutting their retirement benefits and pay."

Connolly added that cutting benefits and pay will make attracting a young, qualified workforce more difficult. "Cuts of this magnitude will make it impossible to recruit and retain the qualified workforce we need to meet our nation's challenges," he said.

Bill Valdez, president of Senior Executives Association said he wants workforce reform, but he disagreed with administration’s plans, saying that the cuts will make government less effective.

"Rather than reducing pay and benefits, the correct policy should be to understand how the federal government could restructure pay and benefits to better compete with the private sector," he said in a statement. "We may save a little money in the near term, but the American public will ultimately bear the steep costs of a federal workforce without the support and resources necessary to deliver upon missions assigned to them by Congress and the president."

The retirement contribution cuts amount to a 6 percent pay cut, argued J. David Cox Sr., president of the American Federation of Government Employees.

"President Trump's budget continues this race to the bottom by penalizing the working-class people who serve and protect their fellow Americans," Cox said.

Tony Reardon, president of the National Treasury Employees Union, added that "federal employees and retirees cannot continue to be the source of spending solutions for Congress."

About the Author

Chase Gunter is a former FCW staff writer.

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