- The Washington Times - Monday, December 28, 2009

When it comes to winning value-added benefits, 2009 will go down in the books as the best year ever for the majority of members of the federal family.

The only downside for working feds is that their 2010 raise will be smaller — in some instances much smaller — than what they got in January 2009. On White House orders, the raise will be limited to 2 percent. That originally was intended to be an across-the-board raise (meaning everybody would get it), but Congress stepped in and insisted that a portion of the national raise (0.5 percent) be used to determine locality pay differences.

Because of that locality component, the actual amount white-collar feds get will vary from city to city. The pay differences are based on local private-sector wages, not — as many incorrectly assume — on the local cost of living.

The new 2010 pay tables are expected to be ready for publication sometime this week. You can check them out at the Office of Personnel Management’s Web site: www.opm.gov.

For retirees — federal, military and Social Security — the deflation that replaced inflation for much of 2009 means that they will not be getting a cost-of-living adjustment in January. Just one year earlier, record high oil prices helped retirees get a COLA of 5.8 percent. But living costs have dropped in many areas, so 2010 will be the year without a COLA.

But the good news, for the majority of the federal family, far outweighs the bad. Consider:

• Congress and the White House OK’d major improvements in the federal 401(k) plan.

Industry experts say the federal Thrift Savings Plan is the best in the nation. That’s partly because it offers the safe-haven G-fund (special Treasury securities) as an investment option and partly because administrative costs are lower than anything offered to private-sector investors. Those lower fees translate into more (in some cases much more) in your account balance when you start withdrawing the money.

Also, the government offers a tax-deferred matching contribution of up to 5 percent to most employees’ accounts. That is more than many, if not most, private-sector companies give their own workers.

Changes in the TSP mean that investors will be offered a Roth option down the road, and may also be given the chance to invest some of their TSP contributions into mutual funds outside the plan. New workers are now automatically enrolled in the TSP and become immediately available for matching contributions. They can opt out, or increase or decrease the amount they contribute. Bottom line, new workers will get into the program much sooner (and at a higher level) than they did when they had to be proactive and join the TSP.

All of the TSP changes were part of the so-called tobacco bill, which gave the Food and Drug Administration greater regulatory authority over tobacco products. Some of the TSP changes were immediate. Others, like the Roth option, will come later.

Other changes approved by Congress and the White House:

• Workers under the Federal Employees Retirement System (about 80 percent of the total federal work force) will now get service time credit for unused sick leave when they retire. Civil Service Retirement System employees have enjoyed that life-time cash for sick leave trade-in option for years.

Under the sick leave credit phase-in, FERS employees who retire before Jan. 1, 2014, will get credit for half of their unused sick leave. Those retiring after that date will get full credit. Generally speaking, 2,080 hours of unused sick leave will translate into another year of service time.

Although the administration originally proposed the FERS sick leave credit concept (which will add millions of dollars to future retirement costs), groups representing federal managers sold it to Congress as a money-saver. They used government figures which show an annual $69 million loss to the government because so many FERS workers burn up their sick leave in the year before they retire. Most of that loss is attributed to disruption of work schedules as once healthy-as-a-horse workers (like their CSRS counterparts before they were given an incentive to save sick leave) suddenly call in sick several times a month.

• Workers under the old CSRS retirement program are now permitted to transition into retirement by going part time. Before the change, CSRS employees who went part time paid a price because pensions are based on length of service and the highest three-year salary span. That worked against part-timers. Now the annuity will be computed on length of service and “deemed salary,” that is, what the part timer would have made had he or she worked full time. This program is optional, meaning federal agencies can adopt it but don’t have to do so.

• Government retirees may now return to the federal fold for a limited period (six months or so) and be able to get both the full retirement benefit and full salary for their new job. Before this change most of the so-called “rehired annuitants” (outside of Defense) had their new federal salary offset by the amount of their retirement annuity. Now agencies in need of short-term help from retired experts and specialists can waive the salary offset.

All of these changes became effective Oct. 28, when President Obama signed the Defense Authorization Act. Some of the changes, like the FERS sick leave credit, will be phased in.

Health care reform

Most active and retired federal workers are pulling for a Senate health care compromise OK’d last week. If approved by the House, it would insulate the federal health program (known as the Federal Employees Health Benefits Plan, or FEHBP) from most changes proposed by national health care reformers. Members of the House and Senate are covered by the FEHBP as well as rank-and-file federal and postal workers, retirees, surviving spouses and, in some cases, ex-spouses.

The FEHBP is considered to be the best health plan in the nation. No fed, retiree or family member can be turned down because of age, health, previous medical conditions or lifestyle. It offers a wide variety of options — fee-for-service plans, health-maintenance organizations and consumer-driven high-deductible, (low premium) plans. The government pays on average more than 70 percent of the total premium.

If they stick, the Senate changes would let the FEHBP maintain its own (existing) risk pool. That means premiums for feds and retirees would be not affected by potentially higher premiums charged to people who are currently uninsured or uninsurable.

While the director of the federal Office of Personnel Management would administer multistate plans and OPM would negotiate premiums, the FEHBP would remain separate from them. The Senate also inserted a provision which said the OPM could hire new people to handle its proposed new duties, but could not reduce staff or resources which now go to administering the in-house federal health plans.

Mike Causey’s Federal Report runs Mondays. Contact him at [email protected] or 202/895-5132.

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