Breaking Down Budget Battles: What Federal Employees Need to Know

5.2.25: Audio automatically transcribed by Sonix

5.2.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Welcome back to the federal retirement Show. I'm your host Val Majewski with American Benefits Exchange. Really appreciate you taking the time out of your busy schedule to join me. And this is for if you're new to the podcast, new to the radio show, new to the federal retirement show, this is for federal employees just like you that are looking for information regarding benefits and retirement. Perhaps some guidance. There are times where we're just giving you information. There are times when we're going over the basics. There are times when we're giving you a kind of current events updates or answering your questions, taking suggestions. Also, one of our recent episodes was a suggestion from a federal employee that said, hey, I think other federal employees would like to know about this. Can you do an episode on such and such? And we did. And that's what this is all about, is so you can make the best decisions while you're going through your working career. Make sense of all this stuff that we know that you're not properly trained and educated on? It's not your fault. Just when you first got hired, you filled out some paperwork. You got to work, right? There wasn't much. Hey, let's learn all about the benefits. Let's show you how to take advantage of your retirement system. Let me show you how the cost of your benefits will change over time, and the options you're going to have in retirement. Most better employees than I have the pleasure of speaking with are left to piecemeal this stuff together.

Speaker1:
And again, that's not your fault. I do wish the government did a better job of educating and training you when you first get hired. But hey, I can't complain too much because it gives me and our company a job to do. We are tasked with, and this is what we decided to serve our federal employees and educating and training you on benefits and retirement. So once again, welcome to the show. If you're new, if you're a dedicated listener, thank you so much. Share this with your colleagues. Because there are federal employees that you're working side by side with that can also use this information. And we know they can because I've heard so many different times. I wish I would have talked to you five years ago, ten years ago, 20 years ago. I wish I would have known this then, or I wish I would have known then what I now learned or know now. So thank you again for doing that and being a listener. Thank you for finding the show. If this is your first time and be sure to share this with others. Get notified about new content, because we've got over 130 episodes now for you to peruse. And lots of topics, lots of information that we've covered. Now, something new that's coming out right. I know there's a lot of shakeup going on with the government. Okay. And depending on the agency you work for, it's going to be a little different.

Speaker1:
It's whether you've taken the deferred resignation or the Vera, or you're in the middle of a riff. Um, you know, whatever your situation is, I know there's a lot going on right now. And also in conjunction with that, there are, um, you know, folks that are the politicians out there, right? And those in the Senate and the House that are proposing legislation when it comes to updating the benefit or retirement structure. And I just want to share with you some of the things that are being proposed now when it comes to updated budget legislation. Right. So this is like your your budget legislation update, if you will, things that are coming down the pike very soon this week. And they could affect some things down the road. Now there there have always been legislations out there. So let me give you a little bit of backstory about me. I've been working primarily with federal government employees now for almost 13 years, and through that time I've seen a lot of different pieces of legislation come and go, right. There have been some outlandish things that have been thrown out there, uh, you know, going way back to 2012 when I first started. And then there have been some things that made more sense and a lot of stuff in between. Right? So not everything that's proposed will get passed, but I just want to give you an idea of what is going on out there when it comes to pieces of legislation that are going to directly affect you or affect your benefits, or affect your retirement.

Speaker1:
So as we go, just understand this is not set in stone. This is not something that is a bill that is going to pass tomorrow. But this is just legislation that is being proposed. And I'll kind of give you some of the story with it. Now, I'm not taking a deep dive into any one of these topics, but I'm just going to give you some overview of what this is being proposed, what is being proposed, as well as give you my opinion as to why or how it's going to affect you. Right? So let's dive into today's topic. When we're talking about legislation or budget legislation updates. First what what is the first thing that is going to be proposed? Now I will say this is being discussed on April 30th. So depending on when you're watching this or watching this or viewing this recording. This is being discussed on April 30th, 2025, and here are the topics that they're going to be talking about. First is raising the Fers contribution percentage. Now if you've gone back through our different episodes, you can go back to the basics when it comes to the Fers retirement system. There are three contribution levels currently for regular Fers employees. Now I'm saying this is outside of special groups. Just a Fers employee that is not part of the special groups.

Speaker1:
There are three different levels of contributions and this is dependent upon when you first got hired. So if you were hired prior to 2013 as a Fers employee, you are putting in 0.8% towards the pension system. 8/10 of 1%. If you got hired in 2013, you're considered a Fers, Ari, and you're putting in 3.1% to the first system beyond 2013. You're a fers firs f a e and you're putting in 4.4% towards the pension system. This new legislation is proposing that 4.4% will be the norm for most federal employees. Most Fers employees, so would increase contribution levels for most Fers employees, even some active actively employed, not just for new hires. New hires are already putting in 4.4. So this is going to raise contribution depending upon uh which Fers employees are going to affect. Now they're not exactly clear on which Fers employees would be affected. But just understand that, uh, this could affect you if it if it passes. So raising the Fers contribution level to 4.4%, eliminating the Fers supplement. Now, this has been a topic ever since I started working with federal employees back in 2012. And it's probably was something that was being talked about beforehand. I have seen legislation consistently that proposes to eliminate the first supplement. It has not happened yet, and I say yet because I'm never going to put it out of the question. But there are a lot of groups out there that lobby against this, that are fighting against this and would want to make sure that this continues to be a benefit that federal employees will enjoy going forward.

Speaker1:
Now, what do I mean by the first supplement? If you're not familiar, this is a free benefit. This is not a benefit that you pay for. This is a benefit that is available for Fers employees that retire with full benefits prior to hitting age 62. So there are ways that you can retire as a full Fers employee on full benefits, not reduced benefits, not early retirement, things like that. There's where you can be entitled to this free benefit, which is essentially a Social Security bridge. It's not called that, but it's a bridge. It means you're going to get a benefit based upon your age Social security, age 62. Sorry, social security benefits, and you're going to get that benefit from when you retire until your Social Security eligible at age 62. It's a gap. It's a bridge. It's a way to get you some sort of benefit between when you retire and when you become Social Security eligible. What they're proposing is an elimination of this for new hires, right. So hopefully it's grandfathered in for those that are currently working. And it's not something that is going to be eliminated for people that are planning on having it. But you never know what the final solution looks like if this goes through. But the proposal initially is for new hires, this would be eliminated.

Speaker1:
Now that goes into, uh, the account when you plan on retiring, if you're going to be a new hire and you're thinking, I can retire right away. And one of those requirements was, I can retire at age 57, or, let's say, your minimum retirement age, which for most new hires now will be age 57. You can retire with full benefits at age 57 with at least 30 years of service. But if you're saying I'm not going to get this supplement, and I'm going to have to wait till 62 to start collecting Social Security, which is one of your three retirement income sources that will factor into when you plan on retiring. So for new hires, hopefully that's that's only the case if this does go through. But it's eliminating the first supplement this new new reform does. Now some will be exempt. Meaning if you're in that special group that I talked about before, your air traffic control, federal law enforcement, federal firefighter, and you're forced out at a certain age. Forced out air traffic age 56. Law enforcement firefighter age 57 is when you're forced out, then you will be exempt according to this. From this elimination, you'll still get the first supplement in that case. So the a couple of nuances here. Again, we don't know what the final bill is going to look like. Or the final solution is if this starts going through and getting past. But that's the second part, is the elimination of the first supplement.

Speaker1:
The next part is the high five. So right now currently to calculate your pension they use the first thing is called the high three. The high three is the average of your highest consecutive three year period of employment. Now let's say let's break that down. It's not three calendar years. It's the highest the average of the annual average of the highest 36 month period or consecutive 36 month period. It doesn't matter if it's a June to a June or a January to a January or an August to August, it's the average of the highest 36 month period during your employment as a federal employee. That's what they're going to use as the first piece of your retirement calculation. The high three. Now they're talking about going to the high five. Now what would that do that spreads out the average right. So now instead of being a three year period it's the average of the highest five year or consecutive five year period. In theory, that will lower pension calculations because you should have been getting pay raises along the way. And if we spread that out to five years, the average of those five years will be less than the average of the highest three years. This will reduce pension payouts and therefore save the government some money. Now each one of these points, you can look it up online will show a projected savings to the the budget with the government. So they have they have a reasons for doing this.

Speaker1:
Whether or not we agree with those reasons, that's a different story. But they have reasons that they're doing this to save money. So but going to a high five from a high three will spread out that average, lower that average and therefore lower pension calculations. Another point is called at will employment. Now right now federal government employees are not considered at will employees. Uh, you know, you just can't be fired for whatever reason or, you know, let go for whatever. It's it's not like the public sector. And when it comes to, you know, hiring, firing things of that nature. Now, we mentioned about the, uh, larger contributions to the first system that they're proposing. They're saying you'll have the choice. If you get hired as a federal employee, you'll have the choice to to be a regular, let's say, first employee and pay the higher amount. Or you can consider yourself an at will employee, pay less contributions into the first system, have a higher take home pay, but now you're considered an at will employee. I don't know how many people are going to want to take that option if it is optional, but if they're incentivizing you to say, hey, the contribution is going to be less. And for me, it has to be drastically less and really increase that take home pay for me to be an at will employee. Now, uh, if it's, you know, performance based or things like that, and you're saying, hey, I'm going to work hard, I'm not I'm not going to, you know, just, uh, uh, twiddle my thumbs and do that.

Speaker1:
Not that anybody, anybody does that, but it's it could be something for you, but I don't I don't know, just in my opinion of how well that's going to work out or if people are going to be choosing that. It has to be a big financial increase in order for me to, to consider that, uh, but it will increase higher pay because it'll be less contributions into the first system. If you have questions about this, you know, reach out to us. Uh, I've mentioned before that our website, uh, Federal Retirement Show.com. You can fill out the form, you can request a full benefits evaluation, get a copy of the book that I wrote on federal benefits and retirement. And one of our representatives, if it's not me personally, one of our representatives across the country will reach out to review your entire situation, send you a couple of different reports so you can have this all mapped out. But understand the difference here, that if this were to go through, this bill was also talking about this, this new budget legislation was also talking about the option for people to be at will employees. Another thing is a filing fee for MSP claims. Now that's the merit System protection Board. And this is where where people can file a claim to say, you know, that that something was unfair as far as, um, you know, a pay raises or advancements or things like that.

Speaker1:
And this board reviews these claims. Now in order to, uh, reduce the amount of claims. Right. And they said the word frivolous in order to reduce the amount of frivolous claims, you know, baseless claims or or claims that are just going to be a waste of time. I'm just kind of using what they're talking about, right? They're going to charge a fee for that. Now, it's not described how much that fee is going to be or what that fee will end up resulting in. But they will say those that win their claims will get their feedback. So if you're willing to put up the money to file the claim, and with the idea of thinking I could lose that money if my claim is denied, then it hopefully will reduce the amount of claims, therefore reducing the load of work for that protection board and then having them focus on, you know, claims that probably have more merit. You know, not not I shouldn't say baseless but just are frivolous, as they say in their word. Right? This would be more concrete, um, you know, ones that have more meat on it. And you think a second before submitting this claim. Right. Because you have to put up this money with the idea it could get lost if it gets denied. So the idea is, again, to to make the process more efficient.

Speaker1:
Have claims, you know, have more validity to them or at least have, uh, you know, more, more backing behind them. And people are willing to put up the money in order to, to have that claim be presented to the board with the idea of, you know, that they could be risking that money if their claim is denied. So that's one of the things that's in here as well, when we're talking about, you know, the the budget legislation that's going to be proposed on April 30th. Another point is fhlbb federal employee health benefits protection. And what they're saying is they're going to be doing an audit of the Fhlbb system and those that are dependent upon it. Now, it's not that federal employees and spouses and things like that need to be worried if they're doing it right, but they're going to be looking at, uh, are people really married? Marriage certificates? Are people really, uh, a dependent? Because, you know, as part of this, they just want to make sure that people are not taking advantage of the system. Now, if you're doing it right, there's nothing to worry about. You know, with this, you actually would want, you know, that to be the case where people are validating that the folks that are getting benefits from the system are actually eligible and should be getting benefits from the system. Why is that? Because if the system is giving out benefits to people who shouldn't be a part of it, it's costing you more money.

Speaker1:
Why? Because there's going to be more claims for those insurance companies that are offering fhlbb plans. And in theory, again, doing an audit of the system to ensure that people are eligible for the program. Uh, the only the people that are eligible for the program are receiving benefits from the program would only benefit you. It'll help the insurance companies out. Yes, it'll help the program out. Yes. But ultimately, it should help your bottom line. At least that's my opinion of it, based on what I know. Now, there could be other reasons. But you, as a federal employee that's getting health benefits from a federal employee program, uh, I would hope that you'd want your prices to be lower, benefits to still be the same, but prices to be lower because they did an audit and found out people that weren't eligible for coverage anymore or weren't eligible for coverage at all are getting, getting removed or disenrolled from the program. So this is one of those things that it's just going to be an audit of it. And if you're doing it right, great. But I'm sure, like me, if I had somebody that was dragging down or let's say, a whole group of people that shouldn't be on the program that we're using benefits. If they got this enrolled because they shouldn't have been eligible in the first place, then that will ultimately reduce my health care costs. Again, in theory, that's the way I'm looking at it.

Speaker1:
You might have a different opinion. We'd love to hear it again. Reach out to us. We'd be happy to discuss. So when it comes to updating the budget legislation or giving you an update on budget legislation, things are going to be talking about on April 30th. Those are the fine points. I know we didn't go into crazy detail on each one, but just giving you an idea again, of what the government is talking about, what these folks that are in Congress are in these positions of power, these elected officials, what they're talking about that could benefit or hurt you as far as benefits and retirement information go, stay up to speed on it. There's different websites out there that that you can subscribe to that have articles that you can find more information on this. You can simply do Google searches. It's not too difficult to find more details about this if you want to talk one on one. Again, reach out to us. We'd be happy to have different conversations about what's going on. But in my experience, and I'll just give you my my brief summary here. In my experience, it does take a little bit for these things to go through. There have been so many different pieces of legislation that I've seen go through or be not go through the the whole process, but just be brought up, right, be brought to a vote or be proposed. And just because something's proposed does not mean that it's going to be approved.

Speaker1:
It's going to be passed. But there is always and I say always, there is always a legislation out there when it comes to government budgets on these topics. Right. I've always seen the high three since I started be a proposal. Um, the increase in Fers contributions via proposal, the, uh, the elimination of the first supplement be a proposal, right. So those are things that I've seen in my 13 years of working with federal employees. They've always been on the chopping block. They've always been on budget and legislation that benefits reform. So you have you have groups out there that lobby against it to keep the benefits, you know, high for you all. But these things can get passed. So just be aware, be agile and learn how to navigate the system if things do change. If you want to again have a conversation, be happy to do it with you. So I really do appreciate, as I said at the beginning, you taking the time out to view our content, to view our channel, to listen to the show. As I said, share with your federal employee colleagues, uh, get notified, subscribe, like share everything. But just also make sure that you're being up to speed on all the different episodes and be notified when we have a new one come out. Thank you again. Really appreciate your viewership and look forward to seeing you on a future episode.

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