Newsflash

Pay Again Will Be Issue in Budget
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The White House on Monday will release its annual budget proposal, which the
administration already has announced will seek a 0.5 percent general pay raise in
January 2013 after two years of frozen salary schedules. Federal employee organizations
have been tepid in their support of the administration's plan, since they would like to
see a larger increase. However, gaining passage of even the 0.5 percent amount will be
difficult. The House already has voted twice to extend the freeze for another year,
allowing a raise no sooner than January 2014, and that remains under active discussion
as a potential offset for extending Social Security taxes at a lower level. A bill
newly sponsored by several Senate Republicans meanwhile would extend the freeze two more
years (technically only through June 2014, but since raises are paid in January,
effectively until January 2015) plus limit hiring to two persons for every three who
leave until federal employment is cut by 5 percent. During the freeze so far within-grade
raises have remained allowed, although newly introduced legislation in both the House and
the Senate would bar those for the rest of this year, as well.

Benefit Proposals Being Watched
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Also being watched closely is whether the White House will repeat a proposal it raised last
fall to increase employee contributions to retirement. That idea has been under more or less
active discussion for more than a year, and the idea was incorporated into a House-passed
plan to find offsets for continuing the Social Security payroll tax at a lower rate
(separately, the House Oversight and Government Reform Committee this week approved a bill
containing the same provision). A House-Senate committee at work on that issue has that idea
among others under consideration. If the budget again contains that recommendation, chances
for an increase occurring in one form or another could rise significantly. The administration's
recommendation was for a 1.2 percentage point increase phased over three years, while the two
House measures call for 1.5 percentage points over that same time. They further for creating
a separate system for newly hired employees that would require them to pay in still more
while receiving less generous benefits through a lower multiplier and a high-five salary base
for computing annuities.

Different Approaches on Retirement Supplement, Too
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At the same time it recommended the retirement contribution increase last fall, the administration
also addressed the “special retirement supplement” received by FERS employees who retire before
age 62. The supplement approximates the Social Security benefit they earned while working under
FERS and is paid until age 62, when they become eligible to draw Social Security benefits. The
administration proposed to end that benefit, although only for those not subject to mandatory
retirement and only for those hired after the effective date. The House payroll tax offset plan—
and the separately approved standalone bill that moved through the committee level—meanwhile
would also protect those subject to mandatory retirement, but would end the benefit for those
retiring after this year, which would impact current employees, as well.