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Trump Proposes Cuts to Federal Pensions

In his 2021 budget, Trump wants to increase employee contributions while cutting benefits

Kris LaGrange's picture
Feb 17, 2020

Trump has unveiled his proposed 2021 budget and just like his past three budgets, he is proposing huge cuts for federal workers.

Cuts for federal workers targeted both their pensions and their salaries. For employees that are enrolled in the Federal Employees Retirement System (FERS), they would be required to contribute 1% more per year until they are contributing 50% to their pensions. Trump would also eliminate the annual cost of living adjustment (COLA) for future FRES retirees. Current retirees would see a reduction of their COLA benefit by .5%.

Other special changes would be eliminated. The FERS special retirement supplement allows federal employees to retire at the age of 62 and cover them until they become eligible for Social Security. The supplement mostly covers employees who worked in law enforcement and are required to retire at age 59.  Trump is also proposing a change to how retirees benefit annuities are calculated. Under his budget, the benefits would calculate the annuity based on the highest five-year salary instead of the current 3-year model. He also proposed reductions to the Thrift Savings Plan’s (TSP) G Fund. The TSP is a fund that is similar to a 401(k) but is made up of government securities. Trump wants to reduce the mandated interest rate from the fund to match the yield on either the three-month or four-week Treasury bill. Government unions are opposed to this change.

“For an administration that has added $3 trillion to the federal debt, gouging federal employee pay and benefits in the name of deficit reduction is ridiculous,” said Tony Reardon, national president of the National Treasury Employees Union. “NTEU will fight these regressive proposals on retirement while supporting existing legislation calling for a 3.5% pay increase in 2021.”

While NTEU is calling for a 3.5% pay increase, Trump doesn’t think that federal workers should get it. Instead, he is proposing a 1% pay increase for civilian workers. This would be significantly less than the 1.9% and 3.1% increases they received over the past two years. In their budget, the White House is proposing adding performance-based bonuses and other financial awards that could offset for some, the lack of a larger across the board raises. Military service members would receive a 3% raise.

“The federal workforce vehemently opposes losing up to half of their retirement benefits and AFGE members will be fighting this proposal at every turn,” Kelley said. “The administration’s rhetoric about affordability is laughable; the federal retirement system is modest, fully funded, and is the only aspect of federal employee compensation that meets private sector comparability.”

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