Welles: Win some, lose some

Retirees get an income boost that beats the pay increase for active employees

Federal employees won some and lost some on pay and benefits this year, and it isn't over yet. Pay increases for federal and military employees will be about 3.1 percent this year if Congress gets its way, as it has in recent years. Depending on where in the country you work, locality pay could bring that increase to nearly 5 percent.

For the first time in many years, federal retirees will get an income boost that beats the pay increase for active employees. For Civil Service Retirement System and military retirees, the cost-of-living adjustment (COLA) for 2006 will be 4.1 percent. Federal Employees Retirement System (FERS) annuitants who are 62 and older will receive the full Social Security adjustment of 4.1 percent, but the COLA in their FERS annuity will be 3.1 percent. FERS retirees younger than 62 do not receive a COLA.

The Republican Study Committee has proposed cutting retiree benefits. Its Operation Offset plan for cutting costs in the aftermath of Hurricane Katrina recommends changing the three-year average for computing federal retirement benefits to five years.

The National Active and Retired Federal Employees Association has denounced the idea. Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee, has indicated that the proposal won't go far this year.

In the meantime, hearings have begun on the Working for America Act. The legislation, which has no sponsors yet, would create a governmentwide personnel system based on pay for performance. Some lawmakers have suggested splitting the proposal into two parts, but federal employee unions want Congress to drop it entirely, noting that no agency has implemented a large-scale prototype. Union litigation has stalled efforts to do so at the Homeland Security Department.

Dental and vision benefits, which some hoped would be available during this year's open season, were delayed a year. Those benefits, which were legislated last year and won't involve any government subsidy, will take effect in 2007. You'll hear more about them during next year's open season for the Federal Employees Health Benefits program. Your best bet: Keep flossing.

Health insurance premiums will increase but less than last year -- about 10 percent on average. To mitigate that continuing increase, the Office of Personnel Management is requiring health care providers to make more use of e-records and other technology. Despite ongoing efforts, costs make it unlikely that legislation will pass to enable federal retirees, like federal employees, to pay health insurance premiums with pre-tax dollars.

The battle to eliminate the onerous Government Pension Offset and the Windfall Elimination Provision once again went nowhere this year. The provisions allow the government to reduce Social Security benefits for federal workers under certain conditions.

Bills to repeal the provisions had considerable congressional backing, but when hurricanes Katrina and Rita turned lawmakers' attention to the rising costs of disaster assistance, any efforts to reform Social Security -- including the Bush administration's proposal to establish private accounts -- went by the wayside.

You'll have to decide for yourself whether you are winning or losing on the benefits front. n

Welles is a retired federal employee who has worked in the public and private sectors. She lives in Bethesda, Md., and writes about work life topics for Federal Computer Week. She can be reached at judywelles@fcw.com.