Press Release

January 25, 2012

Federal pay and benefits did not get much air time Tuesday during the first public meeting of House and Senate conferees tasked with financing the payroll tax holiday for the remainder of 2012.

The nearly two-hour meeting consisted of pledges from lawmakers to work together to figure out how to pay for the tax cut extension, unemployment insurance and the so-called Medicare doc fix.

In his opening statement, Sen. Ben Cardin, D-Md., said federal employees already have contributed to deficit reduction and should not be asked to sacrifice more to offset the cost of extending the payroll tax holiday and other provisions past February. Cardin, who represents many federal workers, said there are “fairer ways” to pay for the package.

“Federal workers work hard every day,” he said, citing examples of the services employees provide at agencies including the National Institutes of Health and the Social Security Administration — both headquartered in Maryland.

Congress agreed to a two-month payroll tax cut extension before it left for recess in December. That deal did not include any provisions affecting federal workers’ compensation, but the House-passed bill contains several such measures and some could find their way into the conference committee’s final deal.

House conferee Chris Van Hollen, D-Md., echoed Cardin‘s call for a fair and balanced approach to paying for the tax holiday, including “closing oil and gas tax loopholes.” He did not specifically mention the House provisions affecting federal employees.

The cost of extending the payroll tax cut extension, unemployment insurance, and averting cuts in Medicare reimbursement fees to physicians through 2012 is about $160 billion. The House-passed bill estimates the proposals reducing federal pay and benefits would save about $65 billion.

Among the federal compensation provisions the conferees are considering to pay for the extensions:

A one-year extension of the current two-year pay freeze for federal civilian workers and lawmakers.

An increase in the amount federal employees and members of Congress contribute to their pensions. The increase would total 1.5 percent and be phased in over three years beginning in 2013.

Elimination of the Federal Employees Retirement System minimum supplement for individuals not subject to mandatory retirement starting in 2013. Individuals subject to mandatory retirement include certain categories of employees such as law enforcement, firefighters, air traffic controllers and nuclear materials couriers. Under current law, the FERS minimum supplement is paid to these employees and to federal employees who retire before age 62. The FERS minimum supplement represents the amount employees would have received from Social Security if they were 62 years old on the day they retired, and is paid until they reach age 62 and begin receiving Social Security payments.

Changes in the retirement structure for new federal employees hired after 2012 and with fewer than five years of creditable service for retirement purposes. Federal workers in that group would contribute 4 percent to their pensions, an increase of 3.2 percent from the current 0.8 percent level. The employee contribution for special occupational groups and lawmakers would increase by a total of 3.2 percent, from 1.3 percent to 4.5 percent.

A high-five average salary calculation for annuities for new hires rather than the current high-three average pay calculation. Existing Civil Service Retirement System and FERS employees still would operate under the high-three calculation.

House and Senate conferees tentatively plan to meet again Feb. 1.