The Republican Study Committee (RSC) released its 2025 budget proposal on March 20, 2024, which includes reforms that affect federal employees.

The proposal, titled “Fiscal Sanity to Save America,” was described by the RSC as “a thorough plan to address our federal spending problem and start paying down our debts. The FY-25 budget balances in just seven years cut spending by $17.1 trillion over ten years, and reduces taxes on Americans by $4.2 trillion over ten years.”

The reforms affecting federal employees include pay, pension plans, and health care.  While the RSC proposals may not be passed by the Senate’s Democratic majority for a final spending bill, below are some summaries of the proposals (as taken directly from the report).

Reforms to Employee Pay

The federal government’s current compensation framework largely ignores the more efficient compensation approach used in the private sector. Federal government employees receive an average of 17 percent more in total compensation when benefits are included than their counterparts in the private sector.463 This is an additional $36.55 billion burden borne by American taxpayers. The RSC Budget supports the following compensation reforms:

– Reform federal worker-paid leave policies to match the value of benefits paid by the private sector. This reform alone would save taxpayers more than $75 billion over 10 years.

– Automatic raises for federal employees should be eliminated. Pay increases for federal employees should be merit-based. This would save taxpayers $57 billion over 10 years.

– Congress should require that agencies only award bonuses when employees meet the standard for “exceeds fully successful.” Exceeds Fully Successful, according to the OPM guidance is “reserved for the individuals who are delivering measurable outcomes for the American public in a way that is measurably beyond the standard set for fully successful.”

– Congress should impose reasonable limits on the size of bonuses that can be awarded and the number of senior employees who can receive an award. More than $1 billion in bonuses for federal employees were paid by the taxpayers in 2016. This included $1.7 million in bonuses to IRS employees who were sanctioned by the agency for misconduct. The RSC Budget would require disclosure of all bonuses for federal employees and require reports to Congress on all large cash bonuses.

– Congress should repeal current law restrictions that prohibit basing bonus decisions on the relative performance of an employee compared to their peers.

– Congress should reform the federal pay scale to attract and reward high skilled, highly productive federal workers, and stop overpaying less qualified employees.

Reform Federal Employee Pension Plans

Federal employees hired since 1984 are entitled to a two-part retirement program, including the Federal Employee Retirement System (FERS) defined benefit plan and a 401k-style plan with up to a 5 percent government matching contribution. This budget recommends a number of “common- sense” reforms to bring federal employee retirement costs in line with the private sector.

This includes:

• requiring new federal workers to be enrolled in the defined contribution TSP system rather than the defined benefit FERS pension system – which would give workers needed control over their retirement savings, ensure solvency for federal pensions and save taxpayers more than $235 billion over 10 years;
• computing a retiree’s benefit based on their highest five, and not three, years of earnings
• increasing the share of employee contributions to FERS over time; reducing or eliminating the COLA for FERS and the Civil Service Retirement System (CSRS)
• eliminating the Special Retirement Supplement (SRS), which provides additional benefits for retirees younger than 62 but who had a long federal work history;
• reforming the interest rate provided by the G Fund in the Thrift Savings Plan (TSP) to more accurately reflect the yield on a short-term T-bill rate.

While the Middle-Class Tax Relief and Job Creation Act of 2012 required new federal employees to contribute more towards their retirement, no changes were made for current federal employees. This proposal would equalize the treatment for all federal workers.

Federal Employee Health Care

The Federal Employee Health Benefits Program (FEHB) provides health insurance coverage for federal employees and their dependents. The portion of these costs covered by the taxpayer does not change with the higher-priced coverage options. As such, federal employees have the incentive to choose the more expensive plans on the taxpayer’s dime.

The RSC Budget would transition to a premium support system for the FEHB. The government would offer a standard federal contribution towards the purchase of health insurance and employees would be responsible for paying the rest.

This option would encourage employees to purchase plans with the appropriate amount of coverage that fits their needs. The government should also reduce its contributions to federal workers’ premiums to align with the private sector more closely.

The RSC Budget would also eliminate FEHB retirement benefits for new hires.

As noted by the Heritage Foundation, federal employees are able to participate in the FEHB plan even after retirement while having large parts of the cost subsidized by taxpayers. This is a benefit unavailable to virtually all private-sector workers.

To read the full RSC proposal, go here (PDF download, 180 pages).