FOR INFORMATION:
Dan Adcock 703-838-7760

National Active and Retired Federal Employees Association (NARFE) President Margaret L. Baptiste told the House Subcommittee on the Federal Workforce today that while the first 23 years of the federal Thrift Savings Plan (TSP) has been a huge success, NARFE is concerned that the current volatile financial market is forcing federal employees at or near retirement to keep working until they can regain their losses.

The TSP is the tax-deferred retirement savings program created by Congress in 1986 and is similar to 401(k) plans offered to workers in the private sector.

“Federal workers years away from retirement should have time to recover.  But employees at or near retirement don’t have that luxury,” Baptiste testified.  “Most of them will either retire with a smaller nest egg or work until the market rebounds.”

Baptiste noted that retirement plans were created so that employees could avoid working into old age and also to make room for younger workers to take their places. “But the purpose of retirement programs are negated when workers cannot afford to retire until they make up for lost gains,” she testified.  “That’s why, as evidenced by the recent market slump, the relatively modest ‘defined benefit’ annuity earned by Federal Employees Retirement System (FERS) retirees has become an essential safety net.”

In addition, NARFE’s President praised Subcommittee Chairman Stephen F. Lynch, D-MA, and others for working with the Association and other federal/postal organizations on including several TSP improvements in the Tobacco Regulatory bill, which became law in June.  That new law provides: 

Automatic enrollment of, and immediate matching contributions for, newly hired federal employees.
A “Roth” option to the TSP to allow participants to make after-tax contributions to the plan and withdraw their earnings tax-free upon retirement.  
Surviving spouses with the same rights over their inherited accounts as any other TSP participant. 
However, Baptiste said that NARFE was concerned about a provision in the new law that will allow participants to invest their accounts in funds outside the TSP. 

“TSP’s index plans are large, well-diversified portfolios of securities that have reduced risk to investors and have a proven performance, over the long term.  The same cannot be said for many funds outside of the TSP,” she testified.  “For that reason, NARFE is concerned that such a ‘self-directed’ option could result in federal workers taking on too much risk.”  

Baptiste suggested that the Federal Retirement Thrift Investment Board consider limitations on funds invested outside of the TSP “to ensure that participants do not put all their eggs in one basket.”

She also noted that, in September, President Obama announced that private 401(k) plans could allow their workers to put payments for unused vacation and sick days into their retirement savings.  “As a matter of equity, NARFE believes that federal workers should have this choice if it is offered to private-sector employees.”        

NARFE, one of America’s oldest and largest associations, was founded in 1921 with the mission of protecting the earned rights and benefits of America’s active and retired federal workers. The largest federal employee/ retiree organization, NARFE represents the retirement interests of nearly 5 million current and future federal annuitants, spouses, and survivors.

National Active and Retired Federal Employees Association (NARFE) President Margaret L. Baptiste today commended President Obama for signing into law the Fiscal Year 2010 Defense Authorization bill, which includes several civil service improvements long sought by NARFE. 

“Enactment of this legislation to eliminate inequities, increase productivity and address the skills shortage in the civil service is a great victory for active and retired federal employees — and something that NARFE has worked for behind the scenes for a long time,” said NARFE President Baptiste. “We are happy the president has signed this important bill into law, and we are grateful to our friends in Congress who moved heaven and earth to include the civil service improvements in the final legislation.”

Baptiste praised Reps. Steny H. Hoyer, D-MD; Chris Van Hollen, D-MD; Frank R. Wolf, R-VA; James P. Moran, D-VA; Eleanor Holmes Norton, D-DC; Gerry E. Connolly, D-VA; John P. Sarbanes, D-MD; Donna F. Edwards, D-MD; Elijah E. Cummings, D-MD; and C.A. “Dutch” Ruppersberger, D-MD, for the significant role they played in this victory on behalf of NARFE and the federal/postal community. In addition, she thanked Reps. Edolphus Towns, D-NY; Stephen F. Lynch, D-MA; and Sens. Joseph I. Lieberman, I-CT; Susan M. Collins, R-ME; Daniel K. Akaka, D-HI; and Jim Webb, D-VA, who served as the Defense bill conferees, for helping to persuade their colleagues, particularly Senate Armed Services Committee Chairman Carl Levin, D-MI, and House Armed Services Committee Chairman Ike Skelton, D-MO, to include the civil service provisions. 

The new law allows federal agencies to re-employ federal retirees on a limited, part-time basis without offset of annuity; permits Federal Employees Retirement System (FERS) workers to initially credit half, and in 2014 all, of their unused sick leave toward retirement; provides for retirement equity for federal employees in Hawaii, Alaska and the U.S. Territories; ends the Department of Defense’s pay-for-performance personnel system, the National Security Personnel System or NSPS, restoring employees to the federal General Schedule pay system; and includes other civil service provisions.

“During the past several years, NARFE has played a leading role, along with other federal and postal employee organizations, in overcoming many obstacles to achieve passage of these needed civil service improvements,” Baptiste said. “For example, absent NARFE’s persistence, legislation sponsored by Collins; Sen. Herb Kohl, D-WI; and Sen. George V. Voinovich, R-OH, (S. 629) to allow federal retirees to be re-employed by the government would not have been included in the final Defense bill. Many federal retirees continue to make critical contributions to our safety and well-being during this time of national need, when work force shortages have deprived some agencies of employees with critical and specialized skills,” Baptiste said. 

Baptiste was particularly pleased that a compromise was reached on the FERS sick leave legislation by phasing in the allowance. “We recognize that the inequity in the treatment of accrued sick leave between FERS and CSRS has hurt productivity and increased agency costs,” Baptiste said. “For that reason, we have strongly supported the concept that all federal civilian retirement programs credit unused sick leave toward retirement.” The NARFE president specifically lauded Moran for being a long-time champion of this issue. 

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NARFE, one of America’s oldest and largest associations, was founded in 1921 with the mission of protecting the earned rights and benefits of America’s active and retired federal workers. The largest federal employee/retiree organization, NARFE represents the retirement interests of nearly 5 million current and future federal annuitants, spouses, and survivors.

FOR INFORMATION:
Dan Adcock 703-838-7760

National Active and Retired Federal Employees Association (NARFE) President Margaret L. Baptiste today expressed concern that federal annuitants and workers will be burdened by the large premium increases announced in the federal employee/retiree health insurance program. “The overall average Federal Employees Health Benefits Program (FEHBP) premium increase of 8.8 percent for 2010 will be difficult for federal annuitants to shoulder in a year when no cost-of-living adjustment (COLA) is expected and when the federal employee pay raise is anticipated to be minimal,” Baptiste said. 

Baptiste is also troubled that the share paid by employees and retirees in the program’s most popular plan (Blue Cross/Blue Shield Standard option) will jump by 12.4 percent for family plans and 15.1 percent for self-only coverage. 

“A 12-percent increase in our program’s most popular plan is bad enough in a no-COLA year for retirees and when workers are expected to receive a nominal pay increase,” said Baptiste, “what’s worse is that this comes at a time when some in Congress effectively want to end the FEHBP and enroll federal workers in an exchange system.”

Last week, Sen. Charles E. Grassley, R-IA, introduced an amendment to the Senate Finance Committee’s health reform bill that would require members of Congress and federal workers to leave the FEHBP and join health exchanges. NARFE opposes this amendment.
   
FEHBP Premiums Could Have Been Lower

“We recognize that the 2010 rate hike was within the range of increases in other large group health insurance programs and that the Office of Personnel Management (OPM) is serious about reducing prescription drug costs.  However, FEHBP premiums could have been lowered if it were not for OPM’s decision to reaffirm the previous administration’s policy of declining a payment available to other public and private employers who provide drug coverage as generous as Medicare’s,” Baptiste said. “Once again, this year, OPM and the Office of Management and Budget left $1 billion on the table -- a subsidy available to and accessed by private employers in the marketplace, which could be used to lower worker and annuitant premium costs,” she said.
The 2003 Medicare reform law provides such employers a payment as an incentive to retain their retiree drug coverage. A 2007 Government Accountability Office report found that premium growth in one of the largest FEHBP plans with many older enrollees could have been 3.5 to 4 percent lower in 2006 had the payment been accessed.  And, it could have reduced overall FEHBP premiums for the year by more than 2 percent. 

Medicare Part B Relief for Federal Annuitants

“While the FEHBP rate increase is bad news, we can take some comfort in the House’s approval on September 24 of NARFE-backed legislation (H.R. 3631) which would protect all federal annuitants – including retirees and survivors who are not eligible to receive Social Security – from the 2010 Medicare Part B premium increase,” Baptiste said.  “NARFE worked tirelessly behind the scenes on this legislation for the past three months.” 

NARFE, one of America’s oldest and largest associations, was founded in 1921 with the mission of protecting the earned rights and benefits of America’s active and retired federal workers. The largest federal employee/ retiree organization, NARFE represents the retirement interests of nearly 5 million current and future federal annuitants, spouses, and survivors.