Weekend Reading on Your Federal Benefits

March 30, 2018 George Ray

(for the week of March 24th – March 30th)

You’re too busy during the week to keep up on all the news around your employee benefits and pay. My weekly summary of the most interesting and relevant news stories could help you and includes my comments and insights.

By the way, if you’ve read something about your employee benefits that you think is important or interesting, share it. And, let me know about news sources that you follow. Have a great weekend.

George Ray
Federal Benefits Online

In this week’s Federal benefits news, we learn that a new bill could help you increase your retirement check, benefits cuts are (probably not) coming, and postal reform could increase health costs for everyone. Let’s hop to it.

Note: It’s Easter weekend, so just take a few minutes to stay current with a bit shorter edition of the newsletter and then enjoy the weekend with your family. Thanks to everyone who keeps reading. Have a blessed Easter.

Bipartisan Bill Would Let Some Feds Boost Their Pensions, for a Price

From Govexec.com

The Federal Retirement Fairness Act (H.R. 5389) has recently been introduced by Reps. Dan Kilmer (D-WA) and Walter Jones (R-NC). It would enable employees who worked for a Federal agency but were not allowed to participate in the FERS retirement program to retroactively pay back contributions and receive creditable service for their time. Many employees begin their careers in temporary status and as a result, are not initially covered by the pension program until hired permanently. Other employees, who may work alongside the temps, are hired permanently from the beginning. It’s demoralizing when your co-worker, who started service at the same time as you, is eligible to retire, but you must continue to work. This measure would enable those affected workers to become retirement eligible at an earlier date and also potentially receive a larger retirement check.

Under FERS, periods of nondeduction service performed on or after Jan. 1, 1989, aren’t creditable for either eligibility or computation purposes, and currently, you can’t make a deposit to get credit for that time. This bill would allow employees to make a 1.3% of pay (at the level at the time of the service) plus interest to gain credit for that time. The National Active and Retired Federal Employees Association (NARFE) supports the bill, as does the Federal Managers Association. With bi-partisan support and no groups or unions to rail against it, it seems likely to pass. If it does, you may want to get out your checkbook.

Benefits Cuts Are (Probably Not) Coming!

From Govexec.com

This week Tammy Flanagan wants everyone to just calm down. There’s been a lot of talk about benefits cuts in the news, and those talks will likely continue. She insists that benefit cuts are probably not coming, but I would like to remain cautiously optimistic. Tammy provides a bulleted list of eight cuts that have been proposed like eliminating the COLA for current and future retirees, eliminating the Special Retirement Supplement for FERS, and basing the pension calculation on your ‘High-5’ instead of ‘High-3’ average pay.

Tammy says that this is nothing new. Back in the mid-1980’s, President Reagan wanted to increase your contributions to the pension program to 9% of pay and wanted to eliminate the ability to retire at age 55 with 30 years of service. Interestingly, we’ve seen changes occur that affect both those issue. Recently-hired FERS RAEs (Revised Annuity Employees) and FERS FRAEs (Further Revised Annuity Employees) do make larger contributions from their pay into the pension trust. And the Minimum Retirement Age (MRA) has modified the earliest age an employee can retire—stretching it from 55 to age 57. As for next year, we already know that there has been a proposal for a pay freeze.

Could some of the other proposals come to pass? The National Active and Retired Federal Employees (NARFE) and the Federal unions will continue to fight against these proposals on your behalf. But I’m not so sure that we won’t see more changes slowly and sneakily being made (see below). It reminds me of the little Dutch boy who tried to hold back the dike by putting his finger in it. But, “when a dike is about to break, a finger just doesn’t cut it. Dikes don’t typically leak—they weaken until whole sections are washed away. No finger will help when that happens.” Although whaddaya know, it turns out the Little Dutch Boy Never Put his Finger in the Dike. Instead, you’re going to need a boat.

Retiree Health Premiums and Postal Reform

From Federalnewsradio.com

Mike Causey takes a break this week from his obsession with TSP millionaires to give us a story about health insurance reform for the United States Postal Service (USPS). The Postal Service Reform Act, which has bi-partisan support, is supposed to help put the Postal Service in better financial shape. (They’ve been defaulting on payments that were due to the Federal government at the end of the fiscal year to pre-fund pension and health benefits for postal retirees.) The bill requires USPS retirees to purchase Medicare Part B coverage. Currently purchasing Part B coverage is optional, although there are some good reasons to have both it and your Federal Employee Health Benefits (FEHB) coverage in retirement.

Oddly, the postal unions favor the bill. Most of their members are current workers, not retirees. So it’s believed that conceding to this could give them leverage to get better pay raises and other favorable reforms for their employee members. NARFE (which does represent lots of Federal retirees) opposes the plan strongly saying it would “balance the Postal Service’s books on the backs of postal retirees.” A study last year by Walton Francis of the Consumer’s Checkbook (an excellent source for Feds who want to compare health plans) says it could cost a retired couple an additional $3,000 per year to sign up for Medicare while paying for FEHB in retirement.

If you don’t work for the US Postal Service, why would this matter? The folks at NARFE see into the future. It’s the crack in the dike mentioned above. Requiring retired Postal Service employees to purchase Medicare Part B could save millions for the USPS, but it could also collapse the dike making Medicare mandatory for all Federal retirees.

See you next week. Thanks!

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