As reported in several outlets, House Republicans are seeking to pay for tax cuts by slashing federal employee retirement benefits. Last week, a committee narrowly approved the proposed cuts. The language appears to be here.
The proposed legislation would cut retirement benefits in several ways. We focus here on one element: an effort to force new federal employees to either accept at-will status or pay an extra 5% of their salary per year into the Federal Employee Retirement System (FERS).
Fortunately for current employees, the proposal is limited to employees “initially appointed to a covered position after the date of the enactment of this section.” (It is unclear whether the change would apply to someone who leaves and reenters government service or who switches from one type of covered position into another.) Within the category of new employees, the proposal applies to most civil servants covered by FERS.
Under the proposal, employees must choose whether “to be employed on an at-will basis.” This choice must be made before the end of the employee’s probationary period. And the choice is “irrevocable,” meaning that employees cannot later change their mind.
For those who accept at-will status, the legislation broadly strips them of rights to challenge a termination. They can be fired “for good cause, bad cause, or no cause at all.” Further, this extends to other “adverse actions,” presumably including suspension, demotion, or similar actions.
The legislation could even be read to preclude employees from challenging their terminations through the process for raising equal employment opportunity claims, such as claims of discrimination on the basis of race, sex, disability, and other characteristics. It is not clear that legislators intended to extinguish such claims, and there are good arguments against such a reading. But the legislation makes an exception only for claims of prohibited personnel practices under 5 USC 2302, which generally must be pursued through the Office of Special Counsel. This narrow exception arguably implies that all other claims are lost. (There is another exception that applies only to employees of the legislative branch.)
If employees choose not to give up these rights, then they will need to pay an additional 5% of their salary towards FERS retirement benefits. Currently, most new employees pay 4.4% under 5 USC 8422 (calculated by starting with 10.6% and subtracting the private sector social security tax of 6.2%). That rate would increase to 9.4%.
The increased contribution rate would not translate to greater benefits. Rather, employees would be paying more to receive the same annuity—which will be cut from current levels under other parts of the proposed legislation.
In sum, under the proposal, new employees have a choice: (1) give up nearly all of their job protections, or (2) lose 5% of their salary per year.