Feb 26, 2018

Trump Administration Releases FY 2019 Budget Proposal

On February 12, 2018, the Trump administration released their Fiscal Year 2019 Budget Proposal. The proposal seeks a pay freeze for all civilian employees. It also includes provisions that would cut employees’ retirement and other benefit programs.

The yearlong pay freeze plan was described as the first step in moving the civil service to a pay for performance system, stating that savings from the freeze would go to a $1 billion interagency fund to reward high performing employees. Officials wrote in a fact sheet that, “This [fund] will replace the across-the-board pay raise that provides federal employees with increases irrespective of performance with targeted pay incentives to reward and retain high performers and those with the most essential skills.”

The budget would also require all employees to contribute an additional 1 percent to their retirement and it reduces Civil Service Retirement System (CSRS) and FERS pension benefits for new retirees by basing annuities on workers’ highest average pay over five years (high-5) instead of over the highest three years (high-3).
It is up the House and Senate to decide whether to adopt the White House’s request. Key Republican Senator James Lankford (R-OK), Chair of the Homeland Security and Governmental Affairs Committee's Federal Management Panel called President Trump's pay freeze "ill advised." "I don't think that gains us anyhing," he stated. "I think it hurts us in recruitment."

NAGE will continue to advocate for our members and fight any threats to employee pay, benefits, and retirement, we ask that you do the same. These elected officials must answer to YOU, we urge you to call your congressional representatives and urge them to reject the proposal.
Below you will find a detailed summary of the White House FY 2019 Budget Proposal, provided to NAGE by the National Association of Letter Carriers (NALC), AFL-CIO.
Federal retirement
  • Increase FERS contributions. For active federal and postal employees covered by the Federal Employees Retirement System (FERS), the budget calls for gradually equalizing employee and agency payroll contributions for pension benefits. This would cut our pay and raise our pension contributions by 1 percent of pay per year for up to six years, costing active carriers up to $3,600 annually after six years. (The actual impact would depend on when FERS employees are hired: Letter carriers hired before 2013 now pay 0.8 percent, while letter carriers hired after 2013 pay 3.1 percent or 4.4 percent, depending on their exact date of hire. The FERS contribution rate, which would eventually be split 50-50 for all letter carriers under this budget proposal, now stands at 14.5 percent.)
  • High-5 average. The pension cuts don’t stop there for active employees. The budget calls for reducing Civil Service Retirement System (CSRS) and FERS pension benefits for new retirees by basing annuities on workers’ highest average pay over five years (high-5) instead of over the highest three years (high-3).
  • Eliminate annuity supplement. It also would eliminate the annuity supplement that covers the gap for employees who retire under FERS before they qualify for Social Security benefits at age 62. For letter carriers and other blue-collar federal employees with physically taxing jobs, this cut would be especially painful.
  • Slash COLAs. For all retirees, the administration’s budget calls for eliminating or reducing cost-of-living adjustments (COLAs). For current and future annuitants under FERS (which covers any employee hired after 1984), the budget would eliminate basic annuity COLAs entirely. For those under CSRS, COLAs would be reduced by 0.5 percent each year. These changes would devastate the finances of retirees who rely on annual COLAs to keep up with the cost of living.
  • TSP-only coverage for new employees. In media reports about the budget, the administration is also said to be studying a policy to end the defined benefit portion of FERS for all new federal employees (including new career city carriers), leaving new employees with only the Thrift Savings Plan (TSP), the defined contribution plan for FERS participants.
  • Reduce the TSP’s G Fund interest rate. This proposal includes a change to the government bond fund ("G" fund), the largest and most popular investment vehicle available in the TSP. Millions of active and retired G Fund investors would receive a reduced rate of return. The new rate would be tied to the interest rate on 90-day Treasury bills instead of an average of medium- and long-term Treasury bond rates. This would reduce the rate from 2.33 percent (in the 12 months ending in January) to 1.55 percent -- which translates into a $1.4 billion annual loss for TSP participants. The cost of this proposal to participants would rise dramatically if longer-term interest rates continue to rise.
Federal Employees Health Benefits
  • Higher premiums for workers. For both active and retired federal employees, the budget proposes decreasing the federal government’s contribution to the Federal Employees Health Benefits Program (FEHBP) to 65 to 75 percent, down from the current 72 to 75 percent range.
  • Although details for how the new contribution levels would work in practice have not been specified, this proposal would likely increase contributions for all retired members, cutting significantly into their monthly take-home pay. A 7 percentage point cost shift for a $20,000 per year family health plan would raise retiree contributions by more than $1,000 annually.
Department of Labor
  • Budget cut. The Department of Labor would see a $1.1 billion, or 10 percent, budget cut under the administration’s proposal.
  • Training cuts. The budget would slash money for training workers who lose their jobs as a result of lay-offs or natural disasters by more than three-quarters, from $220 million in 2017 to $51 million in 2019 – devastating cuts for many workers in Florida, Texas and the Caribbean after last year’s hurricanes. Other job training funds for veterans and Native Americans would be cut by nearly half.
  • Union monitoring. One of the few increases in the DOL budget would go the office that monitors union activities. It states that: “The Budget would…support more audits and investigations to uncover flawed officer elections, fraud, and embezzlement.”

The American Labor Movement has consistently demonstrated its devotion to the public interest. It is, and has been, good for all America. - John F. Kennedy
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