CAUSEY: Congress extends retirement benefits

Lobbyists who work Congress on behalf of working and retired feds outdid themselves last week. They pulled off a trifecta that will mean better pay and higher retirement benefits for tens of thousands of current and former civil servants.

The Senate-House Defense Authorization Act contains three big legislative wins that were long shots just a few weeks ago. Lobbyists and aides to friendly Democratic and Republican legislators toned down the usual rhetoric last week while deals were made behind the scenes.

The improvements include:

• Agreement to give employees under the Federal Employees Retirement System (FERS) (80 percent of the work force) retirement credit for unused sick leave. Workers under the older Civil Service Retirement System (CSRS) have long been able to count their unused sick leave as service time for retirement purposes. Now Congress has agreed to extend that benefit to all feds. They hope this will cure the so-called FERS flu, a condition that causes long-healthy feds to burn up sick leave in the last year on the job.

• Make it possible for retired feds with “rare bird’ skills (ranging from intelligence and national-defense expertise to the ability to speak exotic languages or track terrorist money pipelines) to come back to government and get both full pay and pension. Under current rules (with some rare exceptions) these so-called “re-employed annuitants” must give up a big part of their federal pay because they are also receiving civil service retirement benefits. That dual compensation kicker does not apply to retirees from state and local governments, former federal contractors or other retirees.

• Elimination of the Bush administration’s National Security Personnel System, which covers about 200,000 Defense Department civilians. The NSPS was designed to give managers greater leeway to reward outstanding workers with bigger pay raises. It involved costly training, the elimination of GS grades in favor of broader pay bands, and other changes. Backers say it worked and was getting better each year. Opponents said it encouraged raises based on the old-boy/old-girl network, not performance.

President Obama is expected to sign the changes into law even though the administration initially opposed changing the FERS sick-leave system because it added costs to the retirement fund. The White House also originally proposed to modify, rather than scrap, the NSPS, but relented under pressure from federal unions and a bipartisan coalition in both the House and Senate.

The new perks come on the heels of another big win earlier this year for federal workers. That change, part of the tobacco bill, makes major improvements in the already excellent federal 401(k) plan. One would jump-start Thrift Savings Plan (TSP) investment by newcomers. The big change, however, was to give the green light to offer investors a pre-tax Roth option in the future.

All in all a very big week, coming on top of a very, very good year for active and retired U.S. government workers.

Catastrophic health coverage

The primary reason most people get (or should get) health insurance coverage is to protect them from staggering bills should they have a major illness or accident. All of the plans in the federal health program (the FEHBP) limit your “out-of-pocket” expenses each year. So far, so good.

But in last week’s column, I incorrectly said that people who bump up against their catastrophic limit can simply move to another plan, during the open season, and start all over again. Not so, according to the Office of Personnel Management. OPM explains it this way:

“Catastrophic limits favor the enrollee, not the health plan. A catastrophic limit is the maximum out-of-pocket expense the enrollee experiences before the health plan has to pay all covered medical costs for the remainder of the calendar year. People who reach their catastrophic limit have every reason to stay with their health plan, not switch to another plan. … FEHBP plans are not allowed to have annual or lifetime coverage.”

I’m sorry for the error, but this is one time when I’m glad I was wrong.

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