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Kelley Sharply Criticizes Pension Cut Proposals; Urges Defeat of H.R. 3813

Monday, February 6 2012

Washington, D.C. –The leader of the nation’s largest independent union of federal employees today sharply criticized and called for the defeat of legislation that would slash federal pensions and effectively revoke retirement promises made to federal employees years ago.

In a letter to all members of a key House committee, President Colleen M. Kelley of the National Treasury Employees Union (NTEU) said pending legislation “would increase contributions and cut retirement benefits for federal employees who have played by the rules, responsibly planned for their retirement and relied on the promises that the benefits they earned would not be cut after decades of work, just as many are getting ready to retire.”
The legislation is H.R. 3813, introduced by Rep. Dennis Ross (R-Fla.), which will be marked up tomorrow by the House Oversight and Government Reform Committee.

The bill would require all federal workers to pay an additional 1.5 percent toward their pensions. “This is clearly a steep pay cut for employees who are already in the second year of a pay freeze,” President Kelley wrote.

Such a change would increase the contributions for an employee covered under the Federal Employees Retirement System (FERS) earning $50,000 to $1,150 annually from $400—for a potentially much smaller pension.

The bill also would eliminate, at the end of this year, the FERS Social Security Supplement, which temporarily provides about one-third of the value of the pension for those who have met the age and service requirements to retire before age 62.

“Federal employees have planned for and relied on this benefit being available to them for decades,” Kelley said. “It is hard to imagine that this Congress would blatantly break this promise when so many are just about to become eligible for this benefit.”

There are further changes called for in the bill that would apply to new employees. “H.R. 3813 would also set up an extremely expensive and drastically reduced new pension system for new hires,” President Kelley wrote. The legislation would require employees to pay 3.2 percent more than current contributions. For most, Kelley explained, that would mean contributing 10.2 percent of pay before any contribution to the Thrift Savings Plan. And the pension they would pay so much more for would be reduced by about 40 percent from its current value by using the high five years of salary instead of the current high three retirement calculation and changing the annuity formula multiplier from 1 percent to 0.7 percent.

Along with criticizing the bill’s severe impacts on the pension benefits of new federal hires—and the related ability of agencies to recruit quality employees—President Kelley took aim at the support of some backers of this bill for extending the pay freeze of federal workers for another year.

Kelley pointed out the current freeze will contribute $60 billion in deficit reduction and that a third year would add another $26 billion to that amount. Coupled with that, she said, are the proposed pension cuts, which would amount to more than $38 billion.

“That is more than $124 billion in deficit reduction from one group of middle class workers,” she said. “It is totally unjustified to try to put such a disproportionate burden on one group while continuing to shield the wealthiest from any contribution at all.”

As the nation’s largest independent union of federal employees, NTEU represents 150,000 employees in 31 agencies and departments.

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