WASHINGTON – American Federation of Government Employees National President J. David Cox Sr. today 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.
“Slashing retirement benefits for military veterans under the guise of fiscal austerity was an error that Congress and the president rightly have corrected. Now it’s time to fix another mistake by repealing similar budget cuts targeting newly hired federal employees,” Cox said.
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, so there is no legitimate reason for increasing the contribution rates.
“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 fight this with everything we’ve got. By attacking the pay and benefits of working class Americans, Congress and the administration are no better than the worst employers in the private sector that are competing in a race to the bottom.”
Cox said he is hopeful that a bill will be introduced soon in Congress to roll back these pension increases.