White House Proposal Slashes Federal Retiree Health Payments

February 6, 2007 (PLANSPONSOR.com) - The latest White House proposal for the 2008 federal budget would cut in half the government's health care contribution for new federal retirees who held a government job for less than 10 years.

A govexec.com news report said the provision calls for “reduc(ing) the amount of the government contribution for new annuitants with fewer than 10 years of federal service.” Specifically, according to the news report, it would change the amount the federal government pays for federal retirees’ health coverage from the current approximately 70% to about half that for those who retire with a total of five years of service, according to Office of Personnel Management Director Linda Springer.

To qualify for retiree coverage under the Federal Employees Health Benefits Program (FEHBP) in retirement, according to the report, an employee must be eligible for a federal retirement annuity and must have been continuously enrolled in an FEHBP plan for the five years of service immediately preceding retirement.

Springer told reporters at a budget briefing inWashington, D.C. that the amount of government contribution would be based on a sliding scale according to length of service.

Springer contended that the government’s current retiree health subsidy is “outstanding,” and that it was “the envy of many people in the private sector.”

However, the National Treasury Employees Union, the largest independent union in the federal sector, was quick to criticize the proposal.

“In a time of escalating health care costs it is unconscionable for the administration to propose reducing the government’s share of health insurance premiums for any group of eligible federal employees or retirees,” said NTEU President Colleen Kelley, according to the govexec.com news report. “In recent years, it has not been unusual for federal retirees to face a higher increase for their health insurance premiums than the cost-of-living increase they are receiving in their annuity.”

More information about the Bush budget proposal is here .