Senate Scraps Most Federal Employee Benefits Cuts, Keeps High Contribution Rates for New Employees. Plus - When Feds Need a Financial Advisor

Tracking possible benefits cuts to federal employee retirement benefits since before the new administration took office, it looks like the most more alarming proposals are no longer being considered. However, one provision the Senate has kept is not good news for people looking to start a career in the federal space in upcoming years. This article will explore what was scrapped from the current bill, how FERS contributions may increase for new hires, and why federal employees need a financial advisor they can trust.

How Senate Budget Resolution Bill Could Impact Federal Workers

After taking a look at what is no longer in the current legislative proposal, we’ll see what has been kept in the bill, and how it could limit new hires and the hiring capability of federal agencies.

Scrapped Considerations: FERS Supplement, High-5 Salary, and Increased Retirement Contributions

After getting through the committee process in Congress, the following measures were not included in the Senate Budget Resolution Bill:

• Changing High-Three Average Salary: the figure, used in FERS calculations, will remain as is with the highest paid 36 consecutive months being utilized.Changing the high 3 salary to a high 5 would’ve decreased pension amounts by increasing the three years to five years (60 months).
• Eliminating the Special Retirement Supplement (SRS): Federal employees who retire with an immediate pension before the age of 62 are eligible to receive the FERS supplement to Social Security known as the SRS. Normal FERS retirees can receive the benefit upon reaching their minimum retirement age (MRA) and special provisions employees such as Law Enforcement Officers are eligible to receive the SRS upon retiring, even if younger than their MRA. (You can estimate you SRS dollar amount with our FERS Supplement Calculator.)
• Increasing FERS Contributions to 4.4% for All Employees: Those hired in or after 2014 would not have been affected by this change, but every fed who started their civilian post before that year would have been. All federal workers would’ve seen their contribution percentage to FERS increase to the FERS-FRAE rate of 4.4%. This federal benefits cut is no longer being considered, either. But contributions could still change…

Drastic Increase of FERS Contributions for New Hires

Currently, federal workers before 2013 contribute 0.8% of their salary to the pension system while those hired in that year contribute 3.1%. Newer feds, as just mentioned, put in 4.4 percent of pay. Should the current legislative draft become law, new federal employees under FERS would have a choice between contributing 9.4% on an “at will” basis (easier to terminate) or 14.4% with civil protections (harder to fire). That’s either an 113% increase or 227% increase from the current retirement contribution rate for those starting a civilian position at a federal agency. When taking into account that feds also need to contribute to their TSP (thrift savings plan), as well as FEGLI and FEHB premiums, take-home pay will not be competitive with the private sector, which will make hiring and retention even tougher for federal recruitment efforts.

Financial Advisors for Federal Employees, Maximize Retirement Planning for Your Future

Planning for the future is a crucial aspect of financial stability, especially for federal employees who have unique benefits and retirement options. Working with a fiduciary financial advisorwho understands the intricacies of federal employee benefits and how to maximize them is essential for a secure financial future. 

Investment Management for Federal Employees

Investment management is a key aspect of financial planning for federal employees. With access to the TSP and other investment options, federal employees need to develop an investment strategy that aligns with their risk tolerance and financial goals. This involves selecting the right mix of stocks, bonds, and other assets to achieve a balanced portfolio. A financial advisor can help federal employees understand market trends, assess risk, and make informed investment decisions that support long-term financial success.

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Why Federal Employees Should Consider a Fiduciary Financial Advisor, Financial Planning Services 

Fiduciary financial advisors are legally obligated to act in the best interest of their clients. This means they must provide transparent, objective advice that prioritizes the client's financial goals over their own interests. For federal employees, working with a fiduciary financial advisor ensures that their unique needs and circumstances are considered in every financial decision. 

Benefits of Working with a Certified Financial Planner (CFP®)

Working with a Certified Financial Planner (CFP®) offers numerous benefits for federal employees. CFP® professionals are held to high ethical standards and are required to act in the best interest of their clients. This fiduciary responsibility ensures that the financial advice provided is unbiased and tailored to the specific needs of federal employees. A CFP® can help federal employees develop a comprehensive financial plan, manage investments, and navigate the complexities of federal benefits and retirement planning.

Choosing the Best Financial Advisor for Federal Employees

Choosing the best financial advisor for federal employees involves evaluating their experience, credentials, and understanding of federal benefits. It's important to select an advisor who is familiar with the intricacies of federal employee retirement systems and can provide tailored advice. Federal employees should look for advisors with certifications such as CFP® or Chartered Federal Employee Benefits Consultant (ChFEBC℠) to ensure they receive expert guidance. By choosing the right advisor, federal employees can confidently plan for their financial future.