House Republicans Draft Cuts to Federal Employee Pensions

Federal employees’ pensions could undergo several changes that would gradually reduce their benefits, as part of a Republican federal budget resolution working its way through Congress.

Representative James Comer, R-Kentucky, chairman of the House Committee on Oversight and Government Reform, has offered proposals that would change how federal civilian employees’ benefits are calculated, which would make them pay more into the system while receiving reduced benefits, according to an April 25 release.

“The House Oversight Committee is taking a critical step to advance President [Donald] Trump’s America First agenda and ensure taxpayer dollars are used effectively, efficiently, and responsibly,” Comer said in a statement. “The Committee will consider legislation that delivers a substantial win for fiscal responsibility, achieving a reduction in the federal deficit of over $50 billion dollars.”

The committee is set to consider the legislation on Wednesday, April 30.

The proposal would raise federal and postal employees’ contribution rates to 4.4%, which the release estimated would raise $30.7 billion for the deficit reduction. The current contribution rates are based on each employee’s date of hire, as follows: 0.8% if hired in or before 2012; 3.1% if hired in 2013; and 4.4% if hired in or since 2014, according to the U.S. Department of Commerce.

The Federal Employees Retirement System is the retirement system for federal civilian employees. It provides benefits from three different sources: a Basic Benefit Plan, Social Security and the Thrift Savings Plan, a defined contribution plan. In fiscal 2022, more than 2.7 million people received federal civil service annuity payments; 56% received annuities under the Civil Service Retirement System (which covers federal employees hired before 1984), and 44% received annuities under FERS, according to information from FERS and the Congressional Research Service.

For new federal retirees, the proposal would eliminate the extra retirement annuity payment currently provided to those who retire before age 62, lasting until they reach their Social Security retirement age and saving $10.1 billion, according to the release.

Federal pension benefits would also be reduced by basing retirees’ benefits on the highest average five years of salary, compared with the current standard of the highest average three years of salary, which would save $4.75 billion, according to the release.

Other changes include offering federal employees the option to “serve at will” to receive higher take-home pay, which would save $4.54 billion.

The proposals come as Republicans develop their larger federal budget resolution, which House Speaker Mike Johnson, R-Louisiana, has previously said he would like to finalize as early as May.

The House GOP has a goal of finding at least $2 trillion in savings to partially offset the cost of extending the 2017 Trump tax cuts, as well as adding new cuts to taxes on overtime and tips. The Senate, in its version of the budget plan, has given itself leeway to make as little as $4 billion in cuts.