Trump’s Budget Would Drain Federal Workers’ COLAs

By ASPPA Net Staff • May 30, 2017 • 0 Comments
Federal employees’ COLAs would be eliminated under the fiscal year 2018 budget proposal released by the White House on May 23.

According to FedSmith, the budget the Trump administration unveiled proposes eliminating the cost-of-living adjustment for current and future federal retirees under the federal employees retirement system (FERS), a move that could save more than half a billion dollars in just the next fiscal year alone. It would not end COLAs for current retired federal employees under the Civil Service Retirement System, but it would cut them by 0.5%.

The budget also calls for federal employees covered by FERS to contribute 1% more to their annuities for six years, as well as adjustments to the way retirement benefits are computed for employees covered by FERS and elimination of the supplement for employees who retire younger than age 62, when Social Security eligibility begins.

In proposing these cuts, the Trump administration seeks to “bring federal retirement benefits more in line with the private sector,” FedSmith reports. Still, the administration says, “the federal government continues to offer a very generous package of retirement benefits.”

A recent Congressional Budget Office (CBO) study agrees with that assessment, FedSmith says, reporting that the CBO contends that federal employees receive wages and benefits that are more generous than those in the private sector.

More information about federal retirement benefits under the 2018 federal budget proposal is here.

Proposed COLA Cut Elicits Response

The proposal quickly elicited responses.

Federal News Radio suggested on May 30 that the projected budget savings would come at a higher cost than it may appear at first blush. It quoted Arthur Stein of Arthur Stein Financial LLC as saying that eliminating the COLA would erode the amount of money FERS retirees will be able to spend in the future. Information from Stein says that if inflation is 3%, over a decade, a 72-year old retiree would fail to receive up to 18% in COLA payments; the figure would be 26% if inflation was at 4%.

But the proposal is just that — a proposal; it has not been enacted yet. And that, Federal News Radio suggests, is not certain; it points out that it must survive Congress, whose members will be under pressure from federal employee unions and other groups.

Federal employees — at least some who hold elective office — have already borne that out. According to Government Executive, members of the U.S. House and Senate whose constituents live adjacent to Washington, D.C. have already expressed opposition to the COLA proposal.