Treasury freezes payments to G Fund

FEDERAL WORKERS

February 24, 2006|By MELISSA HARRIS

During the past week, federal workers and retirees likely have heard union rhetoric that the White House and Congress are "raiding" their 401(k) retirement plans to finance the growing federal debt.

That's not really the case - any money lost will be repaid - but here is the story behind those claims.

The federal government is very close to reaching the maximum amount of debt that Congress allows. To prevent exceeding that limit, Treasury Secretary John W. Snow has stopped investments in one of federal workers' 401(k) options, called the G Fund.

The "G" stands for government securities. They are low-risk and quite popular among civil servants.

In the simplest terms, when workers choose to invest in this fund, they give the government money to spend and, in return, the government pays them interest for the use of it.

"The government doesn't have the money right now to keep paying the interest in the fund each month," said Judy Park, legislative director for the National Active and Retired Federal Employees Association. "But once the debt ceiling is raised, any interest someone lost will be put back in there" - by the government taking on more debt.

Park said that Congress has known for some time that it needs to raise the debt limit but has not done so to avoid being seen as a "big spender."

Military pay raises

Ten Democratic senators have requested a higher pay raise for military personnel for next year after the president proposed a 2.2 percent increase that would be the lowest since 1994.

"Such a paltry increase neglects the value of their service and the very real challenges of recruiting and retaining an all-volunteer military in time of war," the Democrats wrote in a letter to Senate budget leaders Judd Gregg, a New Hampshire Republican, and Kent Conrad, a North Dakota Democrat.

The letter, posted on Minnesota Sen. Mark Dayton's Web site, said that the Army fell 6,700 recruits short of its goal last year.

It also states that the president typically proposes a raise 0.5 percent higher than the Employment Cost Index, which measures changes in wages. The President's request this year is equal to the index.

However, Rep. Duncan Hunter, a California Republican and chairman of the House Armed Services Committee, said that, when coupled with increases in bonuses and hardship pay, the total package is sufficient.

"The pay raise is higher than the current rate of inflation, and the pay raises that we've executed for the last four years are, at this point I believe, [a] 29 percent increase [over five years]," he said during a Feb. 8 news conference. "So I think it's solid."

Workplace reform

Last year, Congress did not take up federal law enforcement workplace rules that some officers had hoped would erase perceived inequalities. For instance, Customs and Border Protection officers at Baltimore's port and airport can make arrests and carry guns but do not have the same retirement benefits as other federal officers.

So far, however, Congress has produced only a concept paper that hands off most of its authority on this issue to the Office of Personnel Management, including the crafting of a "pay-for-performance" system and new overtime rules.

"We are the experts on pay and the agency responsible for pay," said Nancy Kichak, associate director for strategic human resources policy at OPM. "The current law enforcement pay system has developed in somewhat of a piecemeal fashion. It's important for someone to have a coordination role."

The paper also divides federal law enforcement officers into two categories and offers two options for their retirement benefits. One is more generous than the other, and both likely would cover now-excluded groups, such as Veterans Affairs and the customs and border officers. But both also would raise the retirement eligibility for existing officers to 52 from 50 - a change that OPM did not propose, Kichak said.

"There's no details" about how the personnel management agency would act, said Jacque Simon, policy director for the American Federation of Government Employees, which represents VA officers and some customs and border officers. "We're still looking at a blank piece of paper that says, `Trust us.'"

The writer can be reached at melissa.harris@baltsun.com or 410-715-2885. Back issues can be read at baltimoresun. com/federal.

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