Budget Deal Contains Billions in Federal Retirement Reform

WASHINGTON – House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., issued the following statement upon the 332-94 passage of the Bipartisan Budget Act of 2013. Issa, who voted in favor of the legislation, noted that it requires newly hired federal employees to contribute an additional 1.3 percentage points of pay toward their defined-benefit pensions.

“Federal employees will continue to enjoy retirement benefits more generous than the vast majority of Americans. No current federal employee will be affected by this legislation, but new employees will be asked to contribute more to secure long-term funding of these benefits. While the budget agreement does not solve our spending problem, the changes it makes to federal retirement will build over time and result in billions and billions of dollars of real savings for the American people.”

Even in the near term, the savings from this modest entitlement reform will grow from $25 million in savings in 2014 to $1.2 billion in annual savings by the tenth year.  Over the second decade these provisions will save nearly $20 billion.

Year By Year Savings of Federal Retirement Reforms 2024-2034

(in millions)

Source: HBC Analysis

The high rate of growth in savings from this provision is due to the large numbers of federal employees retiring over the next decades as the baby-boom population leaves the workforce.

For example, in 2012, 262,000 people aged 60 and older worked for the federal government—or approximately 10 percent of the federal workforce. By 2016, nearly a third of the federal workforce will be eligible to retire. In fiscal year 2013, over 116,000 retirement claims were processed by OPM—nearly 5 percent of workers.

The Oversight Committee first outlined its federal retirement reforms in the Secure Annuities for Federal Employees (SAFE) Act of 2012.