Congress Agrees to Hike Employee Pension Costs: What this Means for Your Paycheck


Last week, both House and Senate lawmakers voted to increase the amount that federal employees contribute toward their FERS pension as part of a deal to extend the popular payroll tax cut. Though the deal impacts just those hired after December 31, 2012 who have less than five years of creditable civilian service, the possibility of all federal employees seeing their contributions increase remains a clear and present danger.

“This is completely unfair to new federal employees,” said William R. Dougan, National President of the National Federation of Federal Employees. “We now have a precedent of treating new hires differently than the existing federal workforce. Congress threw the next generation of federal workers under the bus. This is a despicable way to get legislation passed.”

Under the payroll tax deal, which is expected to be signed by the President this week, those hired into federal agencies after December 31, 2012 will be required to pay an additional 2.3% more for their pensions. Once implemented, the total contribution rate for impacted employees will reach a whopping 3.1% – nearly four times the rate current FERS federal employees pay. This means impacted federal employees will have thousands more deducted from their paychecks annually. For example, a worker that makes $50,000/yr would be forced to pay an additional $1,150 toward their retirement without any corresponding increase in benefits.

“Federal employees, whether they work for the government today or ten years from now, deserve respect for their service,” said Dougan. “When members of Congress treat them like piggy banks, or political punching bags, they belittle the sacrifices that millions of federal workers have already made to serve their country.”

IMPORTANT UPDATE: President Obama signed the bill into law on Wednesday, February 22nd.