House Oversight Committee Chairman James Comer (R-KY) speaking at The National Press Club on Monday, January 30, 2023. Photo: Christine Schiffner/ALM
It was not unexpected with the many cost-cutting efforts already underway by Elon Musk’s DOGE efforts, but now federal employee pension benefits are set to be pared back in Republicans’ giant tax and spending package that has been working its way through the House.
Representive James Comer (R-KY), who is House Oversight Committee and Government Reform Committee Chairman, announced a proposal last week that would force many federal civilian employees to pay higher premiums for retirement benefits and to lower their benefits by changing the formula for calculating payments.
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Since federal employee pensions are too generous compared to the private sector, "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 biggest change would be to raise the premium many long-time federal and postal employees pay out of their salaries in the Federal Employee Retirement System, which is a three-tiered retirement plan: Social Security Benefits, Basic Benefits Plan and Thrift Savings Plan Benefits, a defined contribution retirement plan.
Many federal workers, who have faced mass terminations at various government agencies over the last few months, under the Trump administration’s DOGE unit run by Elon Musk, have been participants in the Thrift Savings Plan, which had a "record year" in 2024
The new proposal would be to raise the retirement contribution rate “up to the new rate of 4.4% of their salary,” according to Rep. Comer. Presently, more than half of federal employees are paying at the 4.4% rate.
Under the current system, contribution rates would be arranged according to the year an employee started: 0.8% in 2012 or before; 3.1% if hired in 2013, and 4.4% if hired in or since 2014. The change would have employees pay 4.4% of their salary, which could raise $30.7 billion over a decade, according to the statement.
Comer said in a statement that the committee’s proposal would achieve a “reduction in the federal deficit of over $50 billion.”
The proposal would also try to save $4.75 billion by basing a retiree’s annuity payment on the highest five years of salary (instead of the current three highest years). Those benefits are calculated based on top salary received and number of years in the US workforce.
Other changes being proposed include eliminating the “additional retirement annuity payment for those eligible to retire before age 62” and are unable to yet collect Social Security benefits,” according to the proposal (except those in federal occupations subject to mandatory early separation), as well as auditing family members of federal employees to see if they are eligible for health benefits on their family member’s health coverage.
Related: Newly terminated federal workers can keep retirement funds in their $986B Thrift Savings Plan
The new proposal does not mention the Civil Service Retirement System, which is a retirement plan for federal employees who were hired before January 1, 1984 that provides an annuity for life.
The Oversight Committee expects to vote next week on the new plan and if approved, it would be combined into legislation to advance President Donald Trump’s legislative America First agenda, which Republicans aim to enact by August.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
