House Budget Committee Chairman Paul Ryan, R-Wis., and Senate Budget Committee Chairwoman Patty Murray, D-Wash., announce Dec. 10 a tentative agreement between Republican and Democratic negotiators on a government spending plan. (J. Scott Applewhite / AP)
A bipartisan budget deal to avoid another government shutdown and reduce the impact of sequestration over the next two years includes thorns for working-age retirees.
In a move expected to save $6 billion, the Bipartisan Budget Act announced Tuesday by Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis., calls for reducing annual cost-of-living adjustments for military retirees under the age of 62.
Working-age military retirees would receive an annual pay adjustment that is 1 percentage point less than the rise in consumer prices. For example, the 1.7 percent COLA that took effect on Dec. 1 and will first appear in January checks would be just 0.7 percent for military retirees under age 62 but still be 1.7 percent for older retirees if the proposal were now in effect.
The COLA reduction would be phased in three years. The December 2014 COLA would be reduced by 0.25 percent, the December 2015 COLA would be reduced by 0.5 percent and the full reduction would take effect with the December 2016 COLA.
Disability retirees would not have their COLAs reduced.
It is unclear whether the reduced COLAs, sometimes called Diet-COLAs, would reduce Tricare fee increases tied to the annual retired pay adjustment. Also unknown is whether retired pay would be recalculated at age 62 to reset the amount to what it would have been if full COLAs were provided. Many, but not all, proposals considered over the years to cut retired pay costs included recalculation as a way of reducing the lifetime loss.
The plan could come to a vote in the House this week and, if it passes, be taken up by the Senate next week.
The budget plan also saves $6 billion from changes in federal civilian retirement.
Retirement savings are part of a two-year budget plan designed to avoid a Jan. 15 government shutdown and to reduce — but not completely prevent — sequestration in 2014 federal agency budgets.
The agreement allows $1.012 trillion in discretionary spending for fiscal year 2014, which started on Oct. 1. This is about halfway between the House and Senate starting positions on the budget.
The 2014 defense budget could be $520.5 billion under the agreement, with non-defense programs getting $591.8 billion.
Savings, which include the retirement proposals, total $85 billion, with $63 billion allocated to reducing sequestration. About $45 billion of sequestration relief would be applied in 2014, evenly split between defense and non-defense programs, Murray said, leaving just $18 billion for sequestration relief in 2015.
Murray said cutting retirement benefits was a difficult decision but the final proposal is scaled back from a $20 billion plan the House brought the table during negations.
Senate negotiators refused the approved House options that would have raised Tricare fees for military retirees and reduce GI Bill education benefits for service members and veterans, according to sources involved in the discussions.
Ryan defended the cuts.
“We think it is only fair that hard-working taxpayers, who pay for the benefits that our federal employees receive, be treated fairly as well. We also think it is important that military families, as well as nonmilitary families are treated equally and fairly,” he said.