Weekend Reading on Your Federal Benefits 3-18.jpg

(for the week of January 13th – January 19th)

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 say happy birthday to the civil service, discover that the chained CPI has arrived, learn of a new proposal for short-term disability coverage, and continue to prepare for a possible shutdown. We’d better get started.

Note: At the time I’m publishing this, there has been a deal struck in the house for another Continuing Resolution, but no deal so far in the Senate and prospects are seeming unlikely according to news accounts. We’ll know the outcome by midnight tonight. Our hopes are for no shutdown so that you can continue to do the valuable work that you do, and continue to be paid for it. Fingers crossed (although that won’t be enough).

Happy Birthday to the Civil Service

From ChiefHRO.com

“Did you get a piece of cake? There’s cake in the break room.”

On January 16th, the Civil Service Commission marked its 135th birthday. Although President George Washington hired the first government employees based on merit, the hiring of workers soon devolved into a spoils system with patronage where people would be rewarded for their loyalty or would even buy their way into positions. (Hmmm?!) This would cause massive turnover every time we elected a new president until George Pendleton (D-OH) pushed the passage of the Pendleton Act putting in place the merit-based protections that are still used today. President Theodore Roosevelt was credited with being the strongest proponent of the civil service requirements as he worked to strengthen the concepts.

Jeff Neal suggests that the Civil Service is beginning to show its age due to a lack of progress on some critical issues like job classes and pay grades. The Classification Act of 1949 created the single General Schedule (GS) to counteract the proliferation of pay schedules, but the workforce and jobs have changed. Accountability is also an issue. Managers and supervisors are challenged to take action against employees who are disruptive or ineffective in their jobs, so the supervisors can also end up becoming part of the problem.

Our merit-based system and the principles upon which it has been built are generally sound and continue to serve the American people, but after 135 years an update that would make it easier for agencies to hire, fire, and pay people fairly is needed.

A Chained CPI and Federal Employee Retirement COLAs

From fedsmith.com

For many years there’s been talk of changing how the Cost of Living Adjustment (COLA) for Federal retirees is calculated. For both the CSRS and FERS pension programs a calculation using the Consumer Price Index for Urban Wage Earners (CPI-W) has been used. But the argument is that this pricing index doesn’t accurately reflect how changes in costs affect retirees (who typically have larger medical and prescription expenses). Many retirees believe that the Consumer Price Index for the Elderly (CPI-E), which uses households with at least one person of age 62 or older, would be more accurate.

There’s also been talk of converting the index used in the calculation to a ‘chained CPI’ which would ‘chain’ together several years of index changes to average or ‘smooth out’ any increases – generally having the effect of lowering increases in pay for retirees. Although it could save the government billions of dollars, it doesn’t go over well with retired Feds.

But here’s an interesting note that Ralph Smith reveals in his article-- the use of the chained CPI was included in the new tax bill that was just passed. The Chained Consumer Price Index for All Urban Consumers will be used to determine marginal personal tax rates, tax credits and the standard deduction (which are all indexed to inflation). This could likely mean that future increases in these amounts will be lower than in the past—saving the government money at taxpayer’s expense.

So here’s something to think about. With the chained CPI now included in some parts of the new tax law, could it be easier to justify changes to other areas that use indexed amounts for calculations—like your pension? It would take an act of Congress to change the current retirement formula, but with the chained CPI now being used in some parts of the tax law that doesn’t seem to be as farfetched as it used to be. Let’s keep a watchful eye on this development.

Legislation Would Provide Disability Insurance Benefit to Federal Employees

From Fedsmith.com

Before discussing disability during my benefits briefings, I’ll often ask those attending ‘What’s your largest asset?’ Most will answer that their home or their TSP account is their largest asset, but I always say ‘Nope. It’s your ability to earn income.’ What? Add up your salary for the remaining years that you will be working. You could also factor in an increase for pay raises, step increases, etc. if you’d like. When you add it all up the total for most people will likely go into six figures. Take away your ability to earn income, and you won’t be able to pay for your home or fund your TSP.

Feds do have access to programs to assist with long-term disabilities (e.g., benefits under The Federal Employees’ Compensation Act, Social Security, and access to a disability pension). Short-term disabilities are not generally covered but can still have a devastating effect on a family’s finances.

The Federal Employee Short-Term Disability Insurance Act of 2018 was introduced this week by Congresswoman Eleanor Holmes Norton (D-DC) to allow Federal workers to purchase short-term disability insurance. The program would be similar to the Federal Long-Term Care Insurance Program (FLTCIP) as it would be voluntary and fully-paid by the employee (no government subsidization) but offer a group program with lower rates. Let’s hope this valuable program doesn’t get lost in the shutdown drama.

How Government Agencies are Preparing for Possible Shutdown

From govmatters.tv

Danny Werfel, Director of the Boston Consulting Group, explains to Government Matters TV host Colby Hochmuth in this 6-minute video how Federal managers are preparing for the possibility that government will shut down after midnight this Friday. Danny was involved in developing shutdown guidance for the Office of Management and Budget (OMB) and later worked at the Internal Revenue Service (IRS) during the shutdown in 2013. He says that agencies have a good understanding of what activities can move forward and what can’t since ‘we’ve been through this drill many times before’.

The challenge for agencies and their employees is to plan for a shutdown without disrupting the activities that the agency normally must do. At some point, when a shutdown seems imminent, work shifts to prepare for closure, and then everything goes into a holding pattern – which is not good for agencies nor their constituents. At the time this was recorded, most pundits were expecting another Continuing Resolution which may likely last through mid- to late February. Today, we’re not so sure.

What Happened at the Defense Department During the 2013 Shutdown

From govexec.com

Reporter Marcus Weisgerber at Government Executive says he’s sick of writing about potential government shutdowns. And you know what Marcus, we’re sick of reading about them. But his article makes an important point – something we frequently forget. It’s not only Federal employees who are affected by a shutdown. Marcus looks back at the 2013 shutdown and uses the Defense Department as an example, to remind us that lots of others can be affected.

During the previous shutdown, Lockheed Martin indicated it would lay off 3,000 employees who worked at government facilities that would not be open. United Technologies, the then-owner of helicopter maker Sikorsky planned to furlough some 5,000 workers. Flight testing was disrupted, and weapons production slowed lacking contract management inspectors. So, shutdowns are not good for business. Not anyone’s.

See you next week. Thanks.

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