The National Commission on Fiscal Responsibility and Reform released its final recommendations today. The Commission recommends changes to the Federal Health and Benefits Program, Military and Civil Service Retirement and giving the Postal Service more flexibility to manage its operations. On another note, the Commission claims that USPS received a $4 Billion bailout which is incorrect.
RECOMMENDATION 4.10: GIVE POST OFFICE GREATER MANAGEMENT AUTONOMY
The Postal Service has run multi-billion dollar losses since 2007, and in 2010 maintained an operating deficit of $8.5 billion, even after receiving a $4 billion bailout from Congress the previous year. With the dramatic expansion of electronic mail, the volume of traditional air-mailed items will continue to fall, only worsening these enormous budget shortfalls and requiring even more federal funding in the future. To put the Postal Service on a path toward long-term solvency, the Commission recommends reversing restrictions that prevent the Postal Service from taking steps to survive – such as shifting to five-day delivery and gradually closing down post offices no longer able to sustain a positive cash-flow.
RECOMMENDATION 4.1: REVIEW AND REFORM FEDERAL WORKFORCE RETIREMENT PROGRAMS.
Create a federal workforce entitlement task force to re-evaluate civil service and military health and retirement programs and recommend savings of $70 billion over ten years.
Military and civilian pensions are both out of line with pension benefits available to the average worker in the private sector, and in some cases, out of line with each other across different categories of federal employment. The Commission recommends a federal workforce entitlement review to analyze civil service and military retirement programs in order to 1) Make program rules more consistent across similar programs, and 2) Bring both systems more in line with standard practices from the private sector. The review will have a ten-year savings target of $70 billion; recommendations of the task force would receive fast track consideration in Congress. Examples of program design reforms that the task force should consider include:
Use the highest five years of earnings to calculate civil service pension benefits for new retirees (CSRS and FERS), rather than the highest three years prescribed under current law, to bring the benefit calculation in line with the private sector standard.
(Saves $500 million in 2015, $5 billion through 2020)
Defer Cost of Living Adjustment (COLA) for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 to increase the benefit to the amount that would have been payable had full COLAs been in effect.
(Saves $5 billion in 2015, $17 billion through 2020)
Adjust the ratio of employer/employee contributions to federal employee pension plans to equalize contributions.(Saves $4 billion in 2015, $51 billion through 2020)
Mandatory Savings: Cut agriculture subsidies and modernize military and civil service retirement systems, while reforming student loan programs and putting the Pension Benefit Guarantee Corporation on a sustainable path.
Pilot premium support through FEHB Program.
(Saves $2 billion in 2015, $18 billion through 2020)
The Commission recommends transforming the Federal Employees Health Benefits (FEHB) program into a defined contribution premium support plan that offers federal employees a fixed subsidy that grows by no more than GDP plus 1 percent each year. For federal retirees, this subsidy could be used to pay a portion of the Medicare premium. In addition to saving money, this has the added benefit of providing real-world experience with premium support.