The end of FERS Supplement - and other stuff

[Khotso]

Just in case anybody missed it last week- the Trump Administration proposal on Federal Employee retirement was released last week.

It includes DOING AWAY WITH THE FERS SUPPLEMENT; Increasing FERS employee contribution from 0.8% to 7% over a number of years; and discussion of a completion removal of FERS altogether, with a replacement of a TSP-ONLY situation for new employees. In addition, FERS would be redesigned to eliminate any COST OF LIVING ADJUSTMENTS in the FERS retirement in the future, AND reduce CSRS Cost of Living Adjustments. All retirement calculations would be reduced based on a High-Five rather than the current High-Three.

Some of the proposals, including the elimination of FERS Supplement, would take effect immediately- in 2018.

Read more here:

Trump?s 2018 Budget Reportedly Targets Federal Retirement Programs - Pay & Benefits - GovExec.com

If you are a federal employee approaching retirement age, this will be a major, major hit if passed.

And it will also be a hit on current retirees.

Trump's budget will immediately affect current CSRS retirees by reducing COLAs by .5 percent from what the current formula would yield -- and that will happen every year going forward. To put that in perspective, I retired 4 years ago, in two of the 3 COLAs I've received since, my retirement income from 35 1/2 yrs of federal work would have actually declined.

To get a sense for what has been going on with federal employee remuneration/retirement, I'll use my own example. Civilian federal salaries (except military) were frozen during my last 3 years. ... So in the past 6 COLAs, my income rose a total of 1.7% (you don't get the COLA your first retired year because you weren't retired). 1.7% over 6 years. That is not sustainable. By my figures, real inflation (what my non-discretionary costs of living have risen over that same timeframe) is more like 10% over that time-frame.

The COLA formula already is inadequate relative to real inflation. Arbitrarily reducing it by .5%every year will have a huge impact unless one doesn't live very long.

 

[Khotso]

Not sure why anyone is complaining right now.

Our retirement is still better then most outside business. That's one of the main reasons a lot of us stayed as Federal Employees, the pay sucked but the benefits made up for it. My understanding is the change in retirement is for new hires, at least for now.

Look CSRS vs. FERS has it's plus and minuses and we can all debate it. Can we all agree we have decent health insurance? Oh! Wait! They want to mess with that also.

I do agree with Norm about Social Security. I earned all my points working a part time job and because I have a Government pension I am going to be penalized on my SS.

Why complain? One, it isn't just for new hires. It's not even just for new retirees. It affects current retirees as well, even CSRS retirees. In that sense, Congress is breaking the "contract" that was in place when many of us made the decision to stay and work for the feds right through to retirement. Many States have already done the same, which leads me to point 2. The long term trend. Not too long ago, most people who worked for an employer throughout a career received some form of pension as a benefit. That is no longer the case. ...... The trend is to lower everyone's boats -- except the owners. Instead of raising others up, we have been bringing everyone down both in wages and retirement benefits over the past 35-40 years.

Seems to me that that justifies concern (or as you called it, complaining).

 

[Khotso]

James - This is an interesting budget proposal by the White House; however, I would not get too excited at this point. Your final statement is correct. Congress has not passed a budget since 2009. I saw Senator Schumer and Congresswoman Pelosi on TV this morning. Both said the President's budget is DOA.

From what I've gathered thus far, only the Ds are taking issue with this. The Rs are in control -- House, Senate, WH. Rs might not like everything in Trump's budget and will certainly make some changes, but haven't heard any of them protesting the proposed changes to federal benefits. This could have a huge impact -- especially on current employees, but also on current retirees.

 

[Warrenlm]

Need to retitle this thread to "The End of Free Stuff" or "The Lifetime Guarantee" or "THEY Can Afford It".

Entitlement is not created when you first take a job, James. Think of a contract renewed annually. How about the business that failed just as some of its employees got so old no one would hire them. Because of government red tape yet.

In Nags Head you can find a wonderfully big City government building, being paid for by the businessman running a pier fishing business with broken down screen doors.

 

[Khotso]

I had to wait to take my Social Security until I was 62, but I took it at 64 and 9 months why should FERS folks be able to retire early and get a subsidy? I paid 8% for the whole time into my retirement plan, you paid less than 1% I was CSRS and qualified for Social Security they cut my SSN by 60% when I retired, you FERS folks are complaining, what for?

"8% for the whole time into" your retirement plan? What government did you work for?

 

[nnuut]

"8% for the whole time into" your retirement plan? What government did you work for?

It changed over the years, as I have said before 7% now is the real number, I hate repeating myself, how much did you donate?

 

[Khotso]

It changed over the years, as I have said before 7% now is the real number, I hate repeating myself, how much did you donate?

Interesting. I paid 7.5% throughout my career (at least that's what I thought). I always thought everyone paid the same amount (7.5%). Huh, so you actually had to contribute 8% for at least a while it sounds. I'll be damned -- wonder what's up with that.

 

[RazorCat]

As a Fed LEO (FERS) I contributed 1.3% towards retirement, and I believe 6.2%'for SS and 1.45% for Medicare.
Trying to find an old pay stub to verify. I know it varied slightly over the years.
I don't really have a problem with the .5% decrease in CSRS COLAS. CSRS has always gotten a COLA that's 1% higher than FERS retirees. The proposal should have read "CSRS and FERS COLAS will be paid at the same rate". Sounds better and accomplishes the same thing.
The one part of these budget proposals I don't agree with is contribution rate changes proposed for current employees.
I could see some variance in contribution rates. But, a 5-6% increase above the one you hired in at is hard pile to swallow.
Still, FERS is a better deal than anything ANY of my non-government retired friends have.

 

[Cactus]

A 5-6% increase above the one you hired in at may be a hard pile to swallow but it is better that benefit cuts. Unfortunately I am expecting both. That is why many of us are here. We foresaw our 3 legged stool being whittled down to a single leg. TSP is the only one we have any control over, so we are seeking to maximize it.

Someone on here used the term double-dipping in their post. I'd watch out with that one as it can be redefined at any time. Wait and see. In the future we will be accused of double-dipping because we have two government pensions (FERS & SS). It doesn't matter that it was set up that way from the beginning. It doesn't matter that it's cheaper than CSRS. What matters is saving SS, and government employees have been a favorite target for quite some time now. "Hey, their pension is better than the private sector so let's just tax it away from them." In the future I expect FERS to share in the CSRS SS cut and any other taxes government can come up with to save SS. Face it, the money has to come from somewhere and we are an easy target no one cares about.

 

[nnuut]

Interesting. I paid 7.5% throughout my career (at least that's what I thought). I always thought everyone paid the same amount (7.5%). Huh, so you actually had to contribute 8% for at least a while it sounds. I'll be damned -- wonder what's up with that.

Oh, I didn't count the 1.45% Medicare.

 

[Khotso]

As a Fed LEO (FERS) I contributed 1.3% towards retirement, and I believe 6.2%'for SS and 1.45% for Medicare.

I don't really have a problem with the .5% decrease in CSRS COLAS. CSRS has always gotten a COLA that's 1% higher than FERS retirees. The proposal should have read "CSRS and FERS COLAS will be paid at the same rate". Sounds better and accomplishes the same thing.
The one part of these budget proposals I don't agree with is contribution rate changes proposed for current employees.
I could see some variance in contribution rates. But, a 5-6% increase above the one you hired in at is hard pile to swallow.
Still, FERS is a better deal than anything ANY of my non-government retired friends have.

Haha. Easy for you to say, not being a CSRS retiree. Let's all pull to bring the other guy down. There's a winning strategy for the working class.

Look, since 1999, there have been 5 instances when the CSRS COLA was actually 1% higher than FERS. 5 out of 18. So, lets say the proposed .5% CSRS had been in place over that time frame (18 x .5 = 9% less COLA for CSRS compared to CPI). Meanwhile the FERS shortfall compared to CSRS w/h been 5% less than CPI. Not exactly even.

On the contribution side, you contributed a total of 7.5%. Same as me. Everyone contributes the same 1.45% to Medicare I believe. So we're even there, except CSRS don't/didn't get matching on TSP contributions and don't get a SS benefit. Depending on an individual's TSP contributions/strategy, FERS can actually be a far better deal -- or so many financial advisers claim.

It may be fine with you, but I'm not okay with any changes made to the retirement promise (contract) that was made to me before I made my decision to stay with the federal government for my entire career. It was the driving reason I stayed on after my first 8 years when I considered leaving the feds.

 

[Khotso]

Oh, I didn't count the 1.45% Medicare.

I didn't either. So we're even there.

 

[Khotso]

A 5-6% increase above the one you hired in at may be a hard pile to swallow but it is better that benefit cuts. Unfortunately I am expecting both. That is why many of us are here. We foresaw our 3 legged stool being whittled down to a single leg. TSP is the only one we have any control over, so we are seeking to maximize it.

Someone on here used the term double-dipping in their post. I'd watch out with that one as it can be redefined at any time. Wait and see. In the future we will be accused of double-dipping because we have two government pensions (FERS & SS). It doesn't matter that it was set up that way from the beginning. It doesn't matter that it's cheaper than CSRS. What matters is saving SS, and government employees have been a favorite target for quite some time now. "Hey, their pension is better than the private sector so let's just tax it away from them." In the future I expect FERS to share in the CSRS SS cut and any other taxes government can come up with to save SS. Face it, the money has to come from somewhere and we are an easy target no one cares about.

That's exactly the thinking behind the current WH budget proposal. The WH is not the federal employees/retirees friend by any stretch.

 

[RazorCat]

Haha. Easy for you to say, not being a CSRS retiree. Let's all pull to bring the other guy down. There's a winning strategy for the working class.

Look, since 1999, there have been 5 instances when the CSRS COLA was actually 1% higher than FERS. 5 out of 18. So, lets say the proposed .5% CSRS had been in place over that time frame (18 x .5 = 9% less COLA for CSRS compared to CPI). Meanwhile the FERS shortfall compared to CSRS w/h been 5% less than CPI. Not exactly even.

On the contribution side, you contributed a total of 7.5%. Same as me. Everyone contributes the same 1.45% to Medicare I believe. So we're even there, except CSRS don't/didn't get matching on TSP contributions and don't get a SS benefit. Depending on an individual's TSP contributions/strategy, FERS can actually be a far better deal -- or so many financial advisers claim.

It may be fine with you, but I'm not okay with any changes made to the retirement promise (contract) that was made to me before I made my decision to stay with the federal government for my entire career. It was the driving reason I stayed on after my first 8 years when I considered leaving the feds.

I don't want anyone's retirement benefits to adversely affected. Most especially current retirees. We worked for it. We earned it. It was part of our employment agreement with Uncle Sam, and a main reason most stayed in government service.
CSRS has unfunded liability while FERS is/was fully funded. So, why isn't it fair for both to get the same COLA? Or not get a COLA? And those CSRS unfunded liabilities are being partially paid from contributions of FERS employees which has now created unfunded liability for the FERS fund. FERS was designed to be "pre-funded" and therefore incurred no unfunded liability in the beginning. CSRS was designed as a "pay as you go" system which worked fine until the number of contributors declined/ceased and retirees increased. Now the once fully funded FERS system has unfunded liability because it's being raided to help cover unfunded CSRS liabilities. I helped fund my retirement, AND yours. Again, why shouldn't we all be treated equally when receiving COLAs.

https://fas.org/sgp/crs/misc/RL30023.pdf

Because the full costs of CSRS are not met by the combined total of employee contributions, agency contributions, interest earnings, and the supplemental payments from the Treasury, some future CSRS benefits will of necessity be paid from contributions that were made to the CSRDF on behalf of employees who are enrolled in FERS. This will create an unfunded liability for FERS, which will be paid off through a new series of 30-year amortization payments from the general fund of the Treasury to the CSRDF.
What I said was "The proposal should have read "CSRS and FERS COLAS will be paid at the same rate". Sounds better and accomplishes the same thing.
From FedWeek:

Cost-of-living adjustments​

Under CSRS, retirees receive COLAs regardless of the age at which they retire. FERS retirees only receive them when they reach age 62, unless they are special category employees, such as law enforcement officers, firefighters or air traffic controllers, or disability retirees. Further, the COLAs of FERS employees are generally smaller than those for CSRS employees. While CSRS retirees receive the full COLA adjustment based on the consumer price index, FERS employees only receive that up to 2 percent; between 2 and 3 percent, they receive, 2 percent; and above 3 percent, they receive the CPI minus 1 percent. Once more, CSRS is the big winner.
​

 

[Scout333]

FERS is only a better deal if you take advantage of matching and maximize your TSP!!!

 

[Boghie]

Boghie the Swami here...

All my predictions coming true. I can see the future. I can speak with the dead, the living, and the yet born...

Here are the facts:

1. America is $19,921,739,XXX,XXX in debt.
2. Both FERS and CSRS are 'invested' in G Fund promissory notes
3. Neither FERS nor CSRS are funded. They are line items in the budget
4. Anyone dumb enough to trust a politicians promise gets a little financial instruction

In the end it will not matter that you were promised something if it wasn't funded. It was DUMB for us Rubes to think that saving 1% toward our pension ('matched' by a 14% contribution by the gubmint) was sustainable and was going into Gore's Lockbox in some super secure Swiss bank. Uh, nope, it gets dumped into the same asset pool as Social Security contributions and then gets 'borrowed' from - although never paid back, simply rolled over. Folks like Nnuut have their pension benefits tied to a line item in the Federal budget - there ain't no assets. We really are not talking about lots of money - say about $5 Billion a year if I remember correctly - but the battlefield has been prepped. While the nasty Republicans may get the blame if they start changing things in smallish ways now, those changes may be easier to handle than an abrupt 25% cut required in the near future. What do you think will happen in a future where Democrats run the show - but, nobody is funding our largess and we can no longer borrow. You don't think the Democrats will sacrifice some of our 'generous' pension benefits to sustain benefits for the poor and needy.

Folks, math don't lie.

 

[PessOptimist]

Some thoughts FWIW.
I started my fed employment at age 45. So. I never worried about the SS supplement but thought it a really good deal for some to be able to retire at MRA and get that “extra” money.

Many I know who retired at MRA didn’t know about the supplement and were surprised. Now many of those people are turning 62 and bitching about reduced annuities. Some went on to other jobs, some did not. Now they are faced with trying to find those SS statements they were sent over the years and figuring out how to establish an account at ssa.gov.

Many years in the military and almost as many years in fed service has taught me one thing. NEVER take anything for granted.

Included in the President’s budget proposal is a “mandatory” proposal to sell the part of the agency I work for. Of course, the Agency’s budget request includes that proposal. This has come up before. It is just a proposal to propose divestiture. That will take years. It helps moral 0% at my level. Adding to the angst is OPM issued a SF50 to many of us reassigning us. No notification of new docs in eOPF. Most of us are still assigned to the same work station, get the same pay and are just a different job title under the same series. A few were changed with no notification and some pay was reduced. OPM says they are fixing the duty station and pay thing. Cause and effect. This didn’t just happen. Management claims no knowledge.
So, fellow feds, things are afoot. Just remember that a budget proposal is not a new federal law. It has to go through legislative process. Unless it becomes a presidential proclamation. (search previous administration).

Listen to James48843, he keeps an eye on things and will always remind you it’s Trumps fault. Actually it all goes back to Reagan and HW and W and… the fact that Carter, Clinton and Obama let the proposal ride is of no consequence.

PO

 

[James48843]

...Listen to James48843, he keeps an eye on things and will always remind you it’s Trumps fault. Actually it all goes back to Reagan and HW and W and… the fact that Carter, Clinton and Obama let the proposal ride is of no consequence.

PO

It's all Herbert Hoover's Fault!

 

[evilanne]

I don't think they can do what is outlined in Trump's plan. All major changes to government employee compensation has applied to new employees, FERS, FERS-RAE & FERS-FRAE. CSRS Offset employees had special rules for those that had a certain number of years under CSRS.

Interesting article from earlier this year https://chiefhro.com/2017/01/10/6-civil-service-changes-we-can-expect-from-the-115th-congress/

There have been multiple proposals in recent years to eliminate the defined benefit portion of FERS and move new hires (not existing employees) to a plan based entirely on Social Security and the Thrift Savings Plan. <SNIP>
The first year of a party change in Washington puts a lot of issues on the table and it is unlikely everything would happen at once. A comprehensive civil service reform bill would take time and energy that the Congress may not want to devote to federal workforce issues. That means the most likely outcome is piecemeal legislation stretched out over both years of the 115th Congress.

 

[Boghie]

I don't think they can do what is outlined in Trump's plan. All major changes to government employee compensation has applied to new employees, FERS, FERS-RAE & FERS-FRAE. CSRS Offset employees had special rules for those that had a certain number of years under CSRS.

Interesting article from earlier this year https://chiefhro.com/2017/01/10/6-civil-service-changes-we-can-expect-from-the-115th-congress/

I think you are correct. However, I have never found James wrong on facts easily researched - regardless of how wrong he is elsewhere Thus, this is something to watch.

This President and this Administration press issues and fight battles they will likely lose. My guess is that changes will apply to new hires...