AFGE National President J. David Cox Sr. this week called on lawmakers to repeal pension increases put in place for new federal employees, following on the successful rollback of pension cuts for military retirees.
In the past two years, Congress has passed two measures as part of deficit reduction efforts that slash take-home pay for federal employees hired after 2012 by increasing their mandatory pension contributions. Since the mid-1980s, federal employees have paid 0.8% of their salary toward a modest defined benefit pension, 6.2% toward Social Security, and additional contributions toward a 401(k)-type defined contribution plan. Under the new measures passed by Congress, federal employees who were hired in 2013 now are required to pay 3.1% of their salary into the pension system, while those hired in 2014 and beyond must contribute 4.4% of their salary.
This tax increase translates into an annual pay cut of $1,400 for the typical GS-7 employee hired this year, who earns $40,000. They will receive no new benefits for these additional payments, which will require employees hired in 2014 to pay about 15.6% of their salary for retirement. The retirement system is fully funded, and thus this is pure cost shifting from the employer to the employee.
Cox said he is hopeful that a bill will be introduced soon in Congress to roll back these pension increases. “Congress has created a second-class and third-class retirement system in which new federal employees earn less than their peers for no other reason than the date they were hired,” Cox said.
“This is an outrageous assault on living standards for the next generation of federal employees, and AFGE will not let this stand. By attacking the compensation of these working class Americans, Congress and the administration have joined the worst employers in the private sector in the race to the bottom.”