After making some governmentwide changes, OPM is now calling on agencies that manage their own independent pay systems to review their policies, and make adjustments where they find pay inequities. The goal, OPM said, is to help address the current 5.6% pay gap between men and women in the federal workforce.

In a memo last week, OPM Acting Director Rob Shriver tasked agencies with other, smaller pay systems to conduct a review process similar to OPM’s recent reviews of the General Schedule, Federal Wage System and Senior Executive Service pay systems.

“Our work is not finished, and we need to do more,” Shriver wrote in a July 18 memo to agency leaders.

Specifically, Shriver told agencies to identify any areas where pay gaps exist in their policies, figure out the reasons behind the disparities, create a plan for reducing those gaps and then keep track of how the disparities change over time.

To try to help agencies through the required pay review process, OPM also published further guidance on how agencies should conduct their data analyses over the next couple months.

“In some cases, agency data analysis may need to probe deeper than the analysis conducted by OPM to fully understand the factors behind a gender or racial/ethnic pay disparity,” OPM wrote in the guidance. “For example, an agency may generate data for major occupations that show gender pay gaps by age groupings within each occupation.”

The new instructions from OPM stem from a 2021 executive order on advancing diversity, equity, inclusion and accessibility (DEIA) in the federal workforce. Part of the sweeping DEIA initiative tasked agencies with identifying strategies and eliminating barriers to equity in federal pay and compensation policies.

Agencies have until mid-October to complete their reviews and report back to OPM.

Federal workforce pay gap over time

The federal government is already a step ahead of the private sector when it comes to pay equity. The national gender pay gap is 16%, while the federal pay gap is 5.6%, according to 2022 workforce data. In other words, in the federal workforce, women make about 94 cents for every dollar men make.

The federal gender pay gap has also improved over time. The current 5.6% disparity is much smaller than the 24.5% pay gap that existed back in 1992.

But at the same time, pay inequity in the federal workforce continues to disproportionately affect women of color. Minority women in the federal workforce, on average, earn less in overall salary.

In numbers, some minority groups of women have better representation in the federal sector than in the private sector. But many minority demographic groups are still behind in pay and representation in leadership, according to several 2023 reports from the Equal Employment Opportunity Commission.

Currently, white federal employees make up a larger portion of the workforce from the GS-7 level, up through the Senior Executive Service. By contrast, people of color hold a higher portion entry-level positions between GS-2 and GS-6, according to a July 2024 workforce report from the Partnership for Public Service.

In its memo last week, OPM asked agencies to focus particularly where there are wider gaps in pay among federal employees.

“When we compare average salary of women and men in various racial-ethnic groups to the average salary of white males in the government, we find larger pay gaps that need to be addressed,” OPM wrote in a July 18 press release.

OPM’s ban on salary history in hiring

The new review requirements for agencies also come after OPM finalized regulations in January 2024, prohibiting agencies from using a federal job candidate’s previous salary history when setting pay in a job offer.

OPM has said its goal with the salary history ban is to address the federal pay gap by removing potential biases that can stem from a federal job candidate’s previous pay rates. In practice, considering past pay rates has often led to higher salaries for men than for women.

OPM’s regulation changes on salary history are expected to take effect for agencies by this October.

“The regulation further positions the federal government as a model employer that prioritizes fairness and opportunity. By helping to close gender and racial pay gaps, the rule is one more step to attract and retain a qualified, effective workforce drawn from the full diversity of America,” the Biden administration wrote in a February 2024 President’s Management Agenda update.

The Department of Justice Gender Equality Network (DOJ GEN), a federal employee organization, has been a long-time advocate of fully banning agencies’ use of salary history in the federal hiring process.

“DOJ GEN applauds OPM for delivering on its commitment to pay equity in the federal sector — first by issuing a robust regulation that bans the consideration of salary history in federal hiring, and now by pushing agencies to go even further,” DOJ GEN President Stacey Young wrote in an email to Federal News Network. “We urge agencies not only to conduct pay audits, but also to meaningfully address any inequities they reveal.”

The post ‘We need to do more’ to close gender-based pay gap, OPM says first appeared on Federal News Network.

A proposal to reform the Federal Wage System (FWS) has moved into the early stages of the government’s rulemaking process, the Federal Prevailing Rate Advisory Committee (FPRAC) announced during a public meeting Thursday morning.

The proposal, if finalized, would amend the federal pay system for blue-collar government workers, more closely aligning it with the locality pay areas for the General Schedule (GS). An estimated 15,000 blue-collar feds would see their pay rates increase.

After FPRAC, a council that advises on pay for blue-collar feds, approved the proposal last December, the changes were sent to the Office of Personnel Management for review. OPM then handed off the proposal to the Office of Information and Regulatory Affairs, an arm of the Office of Management and Budget, to begin the rulemaking process.

Edward George, an American Federation of Government Employees official working at Tobyhanna Army Depot, expressed both gratitude and residual frustration around the proposal’s advancement.

“We are having a hiring problem, we do have skills gaps because of what’s going on with the way that our wages are calculated,” George said during Thursday’s FPRAC meeting. “I appreciate you taking this up once again. It’s very frustrating for our employees … It just seems like it’s [a never-ending] process. We would really like to see this fairly and equitably adjusted across the country as soon as possible.”

The proposed regulations are expected to be published to the Federal Register this October. Once published, OPM will accept comments on the regulations before making any potential revisions and finalizing the rule on FWS.

In total, FWS covers about 192,000 federal blue-collar employees working in trade, craft and laborer jobs. The federal pay system was established decades ago to try to keep federal wages aligned with “prevailing,” or market rates in localized areas.

But since fiscal 1979, many blue-collar feds have seen limits on their annual federal pay raises. And as a result, wages in 75% of FWS localities no longer align with local pay rates for similar jobs.

The idea to align the pay maps for the FWS and GS systems first came up more than 15 years ago, to try to reverse the growing disparity. FPRAC’s current proposal, though, comes from more recent calls from Congress in 2022, asking OPM to consider ways to reform the FWS locality pay map.

If implemented in its current form, FPRAC’s proposal would move about 10% of FWS employees from one wage area to another. Rearranging the FWS locality mapping would, in many cases, impact local pay rates for blue-collar feds working across the country. While about 15,000 employees would get pay increases, another 2,000 or so employees would be covered by “pay retention,” which would maintain pay rates of employees who would otherwise see a decrease to their pay.

But there is still opportunity to make adjustments to the current proposal. Once the proposed regulations are available in the Federal Register, likely later this year, stakeholders will be able to share any feedback they might have about the planned changes to FWS.

And already, there has been plenty of discussion on how to work out the details of the coming changes. When advancing the draft proposal in December 2023, most FPRAC members agreed that some type of FWS reform was necessary, but a couple members expressed disagreements over what those reforms should actually look like.

For instance, some FPRAC members raised concerns about costs and potential complications of implementing FWS map changes. Some members also said they were worried about agencies having to work within their current budgets to implement the pay adjustments, rather than receiving additional funding for them. One suggested alternative was to consider pay changes on a regional basis, rather than amending the entire pay system.

During Thursday’s FPRAC meeting, many attendees also indicated plans to write public comments on the proposed regulations coming this fall.

The public comments, AFGE’s George said, will be “more than they’ve ever seen.”

The post Blue-collar federal pay reform heading toward rulemaking process first appeared on Federal News Network.

One measure of a career is the financial remuneration and whether your money and health needs are taken care of. One federal retiree analyzed the question of whether he was right to switch from the private sector to federal. Joining the Federal Drive with Tom Temin with the details, Abe Grungold, owner of AG Financial Services.

Interview transcript:

Tom Temin  One measure of a career is the financial renumeration and whether your money and health needs are taken care of. My next guest, a federal retiree analyzed the question of whether he was right to switch from the private sector to federal. Here with what he found, Abe Grungold, owner of AG Financial Services. You took a long look back at a long career, Abe. Just give us what you are doing here.

Abe Grungold  Tom, this was a question that has always plagued me my entire federal career. Did I make the right choice from leaving my senior position at a hospital and transitioning to the government? Because I took a $12,000 pay cut, which was about 35% of my previous salary, to work for the government. And I always wondered, did I make the right choice?

Tom Temin  Well, let me ask you this, though, what was the motivation in the first place to go to the government?

Abe Grungold  Well, the hospital was going through a lot of financial problems. They had merged with another hospital and I saw the beginning of the decline of this hospital, and I didn’t see a future with the hospital. I was afraid I was going to get laid off one day.

Tom Temin  Sure.

Abe Grungold  So, that’s why I sought something else a little bit more secure. And, it’s funny. In 1985, I started with the government, and a very close friend of mine also started at the hospital in 1985. I recently had dinner with her, and we discussed our salary, our benefits, and her future retirement. She’s going to retire in three years. And it was just wonderful, comparing my federal salary and benefits and retirement, comparing to hers, and I learned quite a bit.

Tom Temin  Now, we know from previous interviews that you are a multimillionaire in the TSP. And you are not three years from retirement, but about three years into retirement, enjoying the pickleball life and so on. So, tell us about what some of the findings were, compared to your friend.

Abe Grungold  Yes, so we hit upon five major areas: salary, health insurance, the TSP or her 401K, the retirement monthly annuity, and life insurance. So, what I found out from salary is that in the hospital, they did not provide very many COLAs. Over the past 40 years. I remember receiving a COLA once in the seven years that I was there. Now, with the government, I basically received a COLA every year with the government. I think during my last 40 years, there were two or maybe three occasions where the government did not provide a COLA. So even though I started my federal career at a lower hourly rate, I accelerated through promotions, and my salary was much higher than my friend’s present salary, who was also a manager, but I think that was largely due to the COLAs.

Tom Temin  The cost of living adjustments, by the way, for those that don’t yet know what a COLA is. So, you ended up ahead in the long run on salary, then.

Abe Grungold  Yes, yes. I ended up with a $75 per hour last salary that I had three years ago, and her present salary is $55, with a maximum she can achieve of $65 per hour. And I was already at the maximum when I retired with the government. But I think that difference in salary was certainly due to all the COLAs that I had received during my federal career. And, with respect to health insurance, the government provides a large variety of health insurance plans to pick from. The hospital where my friend works, they basically only have two or three choices. And variety is really the spice of life and health insurance. You want to pick a health insurance plan that really tailors to your needs, and that is very important. But the most critical part of the health insurance benefit is, I carry my health insurance into retirement. My friend will not have that opportunity to take their health insurance into retirement. That is a big, big benefit that I received.

Tom Temin  Yes, in some ways, it’s one of the biggest ones. And it’s really pretty much that situation for the rest of the private sector as well as your friend. We’re speaking with Abe Grungold, retired federal employee, and now owner of AG Financial Services. And then there’s the TSP, and the ability to save in a 401K, in which the government and private are a little bit more equal in most circumstances.

Abe Grungold  Yes, my friend had a variety of different deferred compensation plans to pick from: a 401K, a Roth IRA, and a 403B. And I remember participating in the 403B when I was at the hospital. But with the government and the TSP, I have always received a 5% matching to my TSP every year of federal service. My friend has never received any matching from her employer to her tax deferred plan. And that is probably the most important benefit that a federal employee can obtain, in addition to their health insurance. So, that is where I really grew tremendously with my 401K. I certainly didn’t ask my friend what her balance was, but the key is that she never received any match.

Tom Temin  There’s so many variables, such as your tolerance for aggressive investing for much of those years. And you had a pretty good tolerance for that.

Abe Grungold  Yes. I mean, I was a roller coaster rider, and I was always aggressive with my TSP and the merry-go-round riders are the ones who are solely in the G fund. There’s nothing wrong with those investors, but if you want to be a TSP millionaire, you’ve got to ride the roller coaster. And that was a big difference I found in our discussion was the employer matching.

Tom Temin  And then the other factor is, if you had a steadily higher increase in pay, then the more you contribute to social security, which means that at the end of a career, your social security benefit is greater.

Abe Grungold  Yes. I mean, certainly my social security benefit would be higher. I didn’t even ask my friend about that, because I knew that was already going to be true. So, we didn’t even hit upon that question. But what I did ask her was about her retirement annuity that she would receive from the hospital after 39 years, or she’ll have over 40 years when she retires. Now, I didn’t have her formula for her retirement annuity. But we did discuss what the amount is, and mine was more than twice what she would be receiving. She’s going to receive $1,800 per month, and I received at retirement $4,500 per month as my annuity. Now, that is probably also largely due that I have a higher salary. And I also received COLAs for my retirement annuity. She did not know if she’s going to receive any COLAs and I don’t think she will, because they usually buy those from an insurance company.

Tom Temin  You’re a FERS.

Abe Grungold  I was always a FERS employee. And certainly, your retirement annuity is very important. It’s one of the three-legged parts to your stool, and your three-legged stool is your annuity, your TSP and also your FEHB plan that you can take into into retirement. And the last thing that we discussed was life insurance. Life insurance is something that she was always able to obtain at the hospital and I could obtain it through the government. But the key difference is that she cannot take her life insurance into retirement. That benefit will end when she ends her employment. With the government, you could take your life insurance into retirement, and the government provides a basic $10,000 free portion to your life insurance, I believe when you hit age 65. But you could still carry any amount of life insurance into retirement as a federal employee. That is also a significant benefit.

Tom Temin  Well, it certainly helps your spouse take you to your eternal reward in style\, should that need arise.

Abe Grungold  Actually, Tom, I terminated all my life insurance when I left federal service. I just didn’t see a point of needing any, and that was just a personal decision. Every employee needs to evaluate their life insurance needs. And for us, we terminated ours. But, basically, what I learned, Tom, is that overall, I absolutely made the right decision with my federal career in all five of these categories. My federal career excelled in all these categories with salary, benefits, retirement, and certainly social security as well. And there were many other little benefits that we talked about. But certainly these were the five most important.

Tom Temin  All right, so the federal slot machine comes up with a row of cherries, but I have to ask you one existential question. Did you like the work? Was it good to work for the government and you didn’t go crazy waiting until the end?

Abe Grungold  I loved all four federal agencies that I worked for. It provided me with a feeling that I was doing good. Each position was a little bit different. But I was always sort of in the investigative side of government and trying to, you know, correct problems, and catching criminals, etc. And I found that work to be very fulfilling. I mean, I certainly enjoyed working at the hospital. But my federal career far exceeded my needs, in that self actualization on the Maslow hierarchy of needs. Yes, it certainly fulfilled that. All right, Abe ‘Moneybags’ Grungold is a federal retiree and owner of AG Financial Services. Thank you for that detailed analysis.  Thank you, Tom. It really was important to be finding out and now I’m so happy that I did.

Tom Temin  That’s right. Well, you know, living well is the best revenge, they say. We’ll post this interview at federalnewsnetwork.com/federaldrive. Hear the Federal Drive on your schedule, subscribe wherever you get your podcasts.

The post One way to figure if you made the right federal career choice first appeared on Federal News Network.

Financial planning is not something you set and forget. It requires periodic review and changes to maximize results and those changes often depend on the stage of your career.

So how should you tackle that planning? We will talk to experts at OPM, federal unions and more — who are also at various stages of their own careers — to find out!

Federal Drive Host Tom Temin will lead this lively panel discussion as part of WAEPA’s Annual Member Meeting. Our panel of experts will share tips, tactics and best practices that can help you maximize your own financial results — whether it’s your first year in the federal government or your 20th.

Plus, one CPE credit will be earned after you attend the full webinar.

Here are just a few of the topics slated for discussion:

• How to set financial and other life goals as a fed
• When to make financial changes tied to the stage of your government career
• How to maximize return on your TSP contributions
• Where to find tools to help guide your financial planning

WAEPA CEO M. Shane Canfield will open the event and share a brief overview of the association’s 2024 state of the association. Be sure to register now for this must-attend virtual event!

Accreditation: Training certificate for 1 CPE

Federal News Radio, part of the Federal News Network, is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.

The post Financial Wellness Across Your Federal Career first appeared on Federal News Network.

The post Federal firefighters could see bigger paychecks next year first appeared on Federal News Network.

Government employee recruitment often relies on the appeal of the mission. Still people want to be paid and have some financial security. A recent study of state and local emergency response employment seems to indicate one important factor in attracting job candidates, namely having a defined benefit pension plan. Tyler Bond, research director for the National Institute on Retirement Security joins  the Federal Drive with Tom Temin.

Interview Transcript: 

Tom Temin
So tell us, I think I know or can guess what the answer is. But are the existence of defined benefit pension plans important to recruiting public sector employees?

Tyler Bond
Yes. The evidence that we’ve seen through a number of reports strongly suggest that defined benefit pensions are essential for recruiting and retaining public sector employees, especially those public sector employees who work in public safety. So police officers, firefighters, corrections officers, other public safety employees really value the reliability and security of a defined benefit pension. And our new report, I think really speaks to that.

Tom Temin
One of the reasons possibly, as you outlined in the report, is that these types of employees tend to complete their career and retire on that benefit that was offered at their point of employment to a much greater degree than those in the private sector.

Tyler Bond
Yes. Certainly, what we saw with the public safety employees is that once they start working for the fire department or the police department, if they make it past the first few years, they’re very likely to stay through a full career and retire from that plan. Now, it should be said that, especially in the case of a firefighter, a career may be 20 years. And so often what you’ll see is a firefighter who has a second career. Sometimes they begin that second career while they’re still firefighting, sometimes they start that second career after firefighting. But yes, we do see that in our research, we found that 52% of 25 year old new hires are expected to retire from the pension plan that they join when they begin their public safety career.

Tom Temin
Now, this was based on survey of those people that are the recipients. Did it also include the view of recruitment viability of the hiring organizations?

Tyler Bond
So we collected data directly from 28 state and local public pension plans. So we’re using the plans own data about the behavior of their employees. But I think we’ve seen in the real world that employers are realizing the value of a defined benefit pension. So in Connecticut, there’s a town called Trumbull, Connecticut that in 2014, close their defined benefit plan moved all their police officers into 401k style defined contribution plan. At the end of last year, after less than a decade of having their police officers in the defined contribution plan. The town council in Trumbull voted unanimously to reopen the defined benefit plan. And so starting this year, police officers will go back into the defined benefit pension plan. And we’ve seen up in Alaska, they closed their two statewide public sector pension plans on July 1 of 2006. So 18 years ago to the day, and most police officers and firefighters in Alaska participate in one of those plans. And they’re reaching crisis levels of staffing shortages in Alaska right now because of the lack of a defined benefit pension plan. So to give you a concrete example, the city of Fairbanks, Alaska does not have police officers on patrol between 8am and noon every day because they’re so understaffed in their police department. And the lack of a pension is not the only factor, but it is a contributing factor to that staffing shortage.

Tom Temin
Well, I guess everything is in the details. That leads to a couple of questions. But first, let me remind people who we’re speaking to. Tyler Bond is the research director for the National Institute on Retirement Security. And briefly, do you have any evidence or hunch as to whether these results are projectable to federal level law enforcement and public safety and first responders?

Tyler Bond
So we’ve seen that the federal government has retained a pension for its employees for decades now, even when the system was reformed in the 80s and the Civil Service Retirement System was closed in favor of the Federal Employees Retirement System. It still retained a defined benefit pension component to that system. So I think at the federal government level, as well as at the state and local government levels, there is a recognition that it’s important to maintain a defined benefit pension in order to recruit and retain employees who want to make a career out of public service. There’s data from the Bureau of Labor Statistics that suggests that the average tenure for a public sector employee is twice the average tenure of a private sector employee. I think the public sector, especially in certain professions, has really retained that career employment model. And having a pension helps to bolster that.

Tom Temin
Right. When they went from [Civil Service Retirement System (CSRS)] to [Federal Employees Retirement System (FERS)], the pension got much smaller as a percentage of top three salary years and so forth with the added provision of Social Security, and then the TSP and so forth. So you have that kind of three legged stool which exists in most municipalities, I guess. So the question is, what is the correct percentage for the people that have to bear the burden of this pension cost? Is it 100% of the salary for the rest of their lives. Is it 80%? That would seem to be a crucial question. How much is the pension?

Tyler Bond
So it’s very uncommon, in my experience, to see a pension that awards 100% of salary at retirement, the exact amount varies from plan to plan. And I think it’s important to keep in mind that it’s the local stakeholders, the plan sponsors that set those amounts. And so they look at what their workforce needs, and they determined provisions of their pension plan benefits in accordance with what their workforce needs.

Tom Temin
Well. Let me ask you about the affordability side, because when the federal government doesn’t have an affordability problem, because it can print money without regard to whether it actually raises that money in revenue, that is not available in general to state and local governments, unless they want to float bonds, which are probably not great fiscal policy for paying pensions. But you look at some of the places like Chicago or some of the big Midwestern states where upwards of 25, 35, almost 50% of revenues they raise are going to public pensions and health care benefits. There’s no money left for the schools, roads, bridges, etc. How do we get around that in the long term?

Tyler Bond
So most state and local government pension plans are well funded, a lot of plans have been moving in an upward trajectory in recent years. Most state and local pension plans received the majority of their revenue from their investment earnings. On average, it’s only about a quarter of revenues into the plan that come from taxpayer dollars in the form of employer contributions. Where we see the outliers in places like Chicago and Kentucky and elsewhere. There’s really a history of underfunding the pension plan that goes back decades. And that is largely contributing to the problem there. The money wasn’t put in when it should have been. And that’s contributing to the problems they have now. It’s not really a flaw in the design of the plan itself, because we see so many other plans are doing well. And there’s a number of plans that are at or above 100% funding today.

Tom Temin
So the lesson then is have a funding strategy that doesn’t depend ever and ever increasingly on year to year revenues to keep your pension going.

Tyler Bond
That’s right. Just like anyone saving for retirement, you have to put in the money and let that money grow over time. So it’s there for you when you retire. A pension, the same logic applies, you need to contribute the money so that money can be invested and the investment earnings can grow since they represent such a significant portion of plan assets. If the money’s not put in, then that’s when we see plans tend to get into trouble.

The post How important to recruiting is a traditional pension plan? first appeared on Federal News Network.

Social Security taxes start automatically the day you start working. But when the time comes you have got to file an application to get your benefits. When to file? Well, it’s not that simple. You need a “strategy.” To look at some of those important considerations,  the Federal Drive with Tom Temin  talked with federal retirement expert Tammy Flanagan.

Interview Transcript: 

Tammy Flanagan
Tom. I’m glad to be back. And this is a very important topic. A lot of people ask about claiming, and a lot of people have opinions. Pretty strong opinion sometimes about whether it’s better to take it right at 62, or whether it’s a delay. So I’m happy we’re talking about this today.

Tom Temin
Because one of the considerations that you can’t know is when you’re going to depart this earth.

Tammy Flanagan
That would be helpful as far as this decision goes. But I don’t think we really want to go there, do we?

Tom Temin
No. Because if you start at 62, and you’re dead at 68, then if you thought of waiting till 70, you get nothing?

Tammy Flanagan
Well, you won’t need the money, will you?

Tom Temin
So what are the big factors, then?

Tammy Flanagan
Funny we’re talking about this, because yesterday I received in the mail a letter from Social Security, reminding me that I’m going to be reaching my full retirement age next month. And your full retirement age is somewhere between 65 and 67. And at that point, it’s all based on your year of birth. So the young folks who were born in 1960 or later, that’s age 67, I’m a little bit behind that. But anyway, so when you reach that full retirement age, that’s when you’re entitled to your unreduced Social Security benefit, your full benefit. So when you decide to claim that benefit at age 62, which is your first eligibility to claim it, it’s a 30% reduction, or close to it for someone like me who’s older. So we really do have to give some thought to whether or not it makes sense to take it early, or to wait to our full age or some other points all the way up to age 70. So we all have this same eight-year-window. And the theory for some people is, I’m gonna get it while the getting’s good. Because if I’m retired, and who knows what’s going to happen to the future of Social Security, I might as well take it. And that’s fine, you can do that. I don’t think social security is going anywhere. And I think for those of us who are either near or at the age, we can claim it, it would be unlikely for Congress to make big changes, because that would create a riot in my opinion. So I don’t think that’s a big fear that’s well founded, but some people feel that way.

I think the more important questions to ask is, number one, do you need the money right now? For instance, someone like me who’s at a later age, still working, and my husband’s still living, and he has a retirement and I have savings. And we’re not really needing that Social Security check right now. And my theory in my situation is that I’m going to delay it if I can till age 70. Because as long as we’re both still living and comfortable financially, I’d rather have that much bigger check. In case I do live a long time. It’s ok, if we all die at age 81, it really doesn’t matter when you claim it. But what if you live to 91, or even 101, you don’t want to run out of money. And this is one of those checks that comes as long as you live. And if you get that bigger check, the cost of living adjustments is going to be based on a bigger amount. So that’s my theory.

Tom Temin
And then there’s the idea that because they tax Social Security, which you paid for with a tax, but that’s another topic. That if you take it while you’re still having healthy other streams, like from full time work, you’re going to pay a higher tax rate.

Tammy Flanagan
That’s absolutely true. So why create more taxable income when there’s an advantage to leaving it where it is. But we always have the other situation where people retire at younger ages, they might stop working completely when they’re in their 50s or early 60s. And without claiming Social Security, they probably don’t have enough money to really live comfortably. And so if you’ve saved enough in your savings, and you have government pension, in the case of our audience, there’s nothing wrong with claiming it when you retire. So I don’t want anyone to ever feel guilty that they took it early. Because that’s what retirement is, it’s the source of those three streams of income. So there’s something to be said for that as well.

Tom Temin
And by the way, what is the processing time these days? If you make your application to Social Security, how long does it take till that first check comes?

Tammy Flanagan
Well, it’s nothing like your first civil service or first retirement check, because Social Security is all electronic. So if I went on Social Security’s website today, I could file for my benefit right there online, it’ll probably take me about 30 minutes. And I should have my first check by next month. So it’s really not a big process. The disability benefits are a little more time consuming, because they have to be reviewed and medical documentation has to be considered. But if you’re applying for Medicare or Social Security retirement, it’s a pretty painless process.

Tom Temin
And briefly, what are the considerations for spouses? Say one half of the couple has consistently earn more, and therefore will have a bigger social security payout. That is the one that goes to the spouse if the higher earning one dies first?

Tammy Flanagan
Yeah. Well, first of all, a lot of people don’t realize this, especially if you’re younger, and you haven’t thought much about this. But while both spouses are living, there could be a benefit paid on the higher incomes work record to the spouse who’s still alive. So we have what’s called spousal benefits, which we don’t have under the Federal Retirement System. So in other words, let’s say you had a spouse who worked very little outside the home, doesn’t have much if any social security of their own, they can claim benefits based on their spouse’s work record. And they can collect up to 50% of that while both of you are still living. So a lot of spouses are still entitled to those benefits. We think of those more like back in the station wagon days when dad took the car to work, and mom stayed home with the kids. But we still have a lot of stay at home parents today and people who don’t work outside the home for whatever reason. So that’s still in play.

Tom Temin
So that means 50% of the higher income person’s social security is more than the regular amount for the one who earned less.

Tammy Flanagan
That’s correct. So for instance, let’s say, I’m the higher wage earner and my benefit is $2,000 a month that my full retirement age. And my spouse, let’s say only has earned a benefit of 600 a month? Well, they’re gonna get half of that 2,000, because that’s more than their own 600. So yeah, the higher benefit would be payable in that case. And again, that also depends on what age you claim it, because there’s reductions. But as a widow or a surviving spouse, it becomes a different story, because in that case, you can claim that widows benefit at any age if you have young children, or as early as age 60, even if there are no children that are dependent on you. So in some cases, if your spouse dies early, you can claim that widows benefit and delay your own earned benefit to pick up those extra credits. So that’s one case where you can choose between the two, if you haven’t claimed the first one in advance. So that’s another option there. But widows can take over that deceased spouses benefit at any age, as long as they’re 60 or above.

Tom Temin
We’re speaking with Tammy Flanagan, she’s a principal with retirefederal.com, and a longtime expert in these matters. And at the same time, you’re thinking about Social Security as a Fed, as you touched on a moment ago, there is your main federal annuity, Your FERS annuity that you would have to apply for. And as you imply that just doesn’t come the week you retire, by any stretch of the imagination, does it?

Tammy Flanagan
No. It’s a whole process when you apply for your federal retirement benefits, sometimes we call it your government pension. But whether it’s FERS or CSRS, that benefit is going to be processed from your agency, through the HR office onto payroll onto OPM. And even you have a role in that whole process, because it’s your responsibility to file the application, to make sure it’s filled out completely, make sure you’ve included all the documents that it’s asking you to include. And then handed into HR at least 30 days more likely 60,90, even 120 days ahead of your date of retirement. Because your HR office has work to do. They have to put together this literal package of papers that they’re going to put in a FedEx envelope, and mail that to OPM as soon as you retire. Usually, within the first two weeks of your life after retirement that goes to OPM. Payroll has to wait until they pay out your last paycheck to send that payroll information. And they do send it electronically from payroll. But that also hits OPM within that first month after you retire. So once it gets to OPM, it goes to a mail room because it’s a package of papers. So they have to put two hole punch and put it in a cardboard folder and do a little triage to see if there’s maybe a health benefit change on the top of that stack or maybe this is a disability, it has to go to a different office to look over the medical documentation. Or maybe this is someone who it’s questionable whether or not they’re eligible to retire. So somebody has to make sure that they’ve met the age and service requirements to even collect the benefits. So there’s a lot of work that gets done along the way before it even gets to that final processing stage where they start to cut the checks and pay you on a monthly basis.

Tom Temin
And if you had many different assignments at different agencies or in and out of government, does that complicate it and make it slower?

Tammy Flanagan
It can. I’m working with a guy right now who worked for three different agencies. One of them was up on Capitol Hill, and they don’t do official personnel folders with the normal documentation. They have a transcript of service. And OPM wasn’t given him credit for that because they didn’t have that transcript from up on Capitol Hill. So that delayed his, believe it or not, he’s still waiting after two years. There was a couple of other things that got in the way of his. So they won’t finalize that claim until they have everything they need to really give you the accurate benefit.

Tom Temin
Well, here’s your retirement cake. And we’ll see in two years maybe with a check, great.

Tammy Flanagan
That’s not the majority, by the way, so don’t worry if you’re planning to retire.

Tom Temin
What’s your experience with contacting OPM, if you have a question during this period?

Tammy Flanagan
Yeah, well, first of all, wait until you get your civil service active number, they call it a CSA number. Because without that number, you’re not going to get to talk to anybody. If you’re in that Limbo stage, where you’ve just left the agency, call back to your HR office, they can probably help you with any questions you have until OPM takes over. But if you are going to call OPM as a retiree, I suggest by all means, call early. If you’re on the East Coast, it’s a little easier, because 7:40am is 7:40am. But if you’re out in California, that’s like get up at 4am to make that phone call, may or may not be practical for you. But the earlier the better. Because those customer service lines get very busy later in the day, especially on a day like Friday afternoon or Monday morning. So be strategic. And when you’re calling in, you’ll have less frustration, hopefully.

Tom Temin
Really then retirement planning is one thing, but actually starting the process, you should give yourself six months. Shouldn’t you?

Tammy Flanagan
I’d say start at least a year ahead of time. And if you can, if it’s available to you, take a pre retirement planning class at least five years before you plan to retire. It’s not too early, because there’s things that have to be in place for five years in order to carry your health benefits your life insurance. Those things have other requirements to keep those as a retirement benefit.

The post Why you need a strategy when it’s time to claim Social Security benefits first appeared on Federal News Network.

The Senate Armed Services Committee’s version of the fiscal 2025 National Defense Authorization Act last week showed support for a 2% raise for DoD civilian workers and a 4.5% raise for military members. In a vote of 22-3 on June 13, committee lawmakers advanced the 2025 NDAA to the full Senate for consideration. The House passed its version of the NDAA last week.

Although the NDAA’s provisions only apply to Defense Department employees, both civilian DoD workers and the rest of the civilian federal workforce on the General Schedule would see the same percentage added to their paychecks, if the raise is enacted.

In House appropriations legislation, committee lawmakers remained silent on the topic of the federal pay raise, indicating a likely alignment with the president’s raise proposal. The GOP-led committee advanced legislation for a fiscal 2025 spending package last week along party lines. The Senate Appropriations Committee has not yet released its versions of fiscal 2025 spending legislation.

President Joe Biden’s request of a 2% pay raise for most civilian federal employees on the General Schedule, if enacted, would be the smallest annual raise for feds since Biden took office. The 2% proposal comes in contrast to the 5.2% federal pay raise for 2024, which was the largest raise for feds since the Carter administration.

Biden’s initial raise proposal in March, contained in the fiscal 2025 budget request, did not indicate a breakdown between base pay and locality pay. But in most years, presidents typically set aside 0.5% for locality pay and leave the remainder for the across-the-board raise.

For the federal pay raise, nothing is set in stone until Biden signs an executive order to enact it, which usually happens in December. Ahead of that finalization, federal unions and other employee organizations have spoken out in favor of a larger pay raise for feds in 2025, calling for a 7.4% boost rather than the 2% proposal.

Legislation titled the FAIR Act, if enacted, would offer that large of a raise to feds next year. Unions including the National Treasury Employees Union have endorsed the bill, which lawmakers first introduced in January.

“NTEU continues the fight to pass the FAIR Act,” NTEU wrote in a blog post Tuesday. “Such an investment in the federal workforce would help close the significant pay gap between federal employee and private sector pay and help the federal government compete with the private sector for talented employees.”

But many agencies are already trying to figure out how to incorporate the larger 5.2% raise into their budgets for 2024. Some agencies’ budgets this fiscal year remained relatively stagnant, while other costs, such as federal employees’ paychecks, have continued to rise.

The next step in the process toward finalizing the federal pay raise will likely come later this summer. To avoid defaulting to the Federal Employees Pay Comparability Act (FEPCA), Biden will have to issue an alternative pay plan by the end of August.

Federal employees currently earn about 27.54% less in wages than those in the private sector with similar occupations, according to the Federal Salary Council. Although FEPCA allows for a large enough annual federal pay raise to bring the federal-private sector wage gap down to 5%, no president since 1994 has incorporated the fully authorized amount.

Decades of deviation from FEPCA have caused distortion of federal pay in multiple ways. It would now cost an estimated $22 billion to bring General Schedule salaries in line with the private sector.

Any potential changes in Congress that might break away from the current pay plans could still take place this fall ahead of an executive order in December.

The post Proposed 2% federal pay raise gets support in 2025 defense authorization bill first appeared on Federal News Network.

For many people, thinking about retirement, is axiomatic. Pay off that mortgage on the house. It might be wise to think through this strategy a little more carefully. For why, the Federal Drive with Tom Temin spoke with private wealth advisor Thiago Glieger of RMG Advisors.

Interview Transcript: 

Thiago Glieger Yeah. I think it’s one of those things that with most retirement planning, with most financial planning, what seems to be good for one family isn’t always the best thing for another family. And it’s kind of against the grain, because in medicine we think about, there’s a certain symptom that’s met with a specific treatment or medication or whatever. But in financial planning, we start to recognize it doesn’t quite work that way. So you have to be careful and look at your own circumstance very objectively. But what doesn’t help is the fact that all these pundits are often talking about, you can’t have any debt to your name. Liability is bad, bad, bad, bad. You need to pay off your mortgage before you head into retirement. And so people start to have this ingrained idea that they can’t retire until they do so, or going into retirement with a mortgage is a really bad thing.

Tom Temin But a mortgage has characteristics, and homeownership have characteristics that are different from other kinds of debt. And that’s the crux.

Thiago Glieger Yeah. I very loosely categorize debt into two different categories, one being good debt and then bad debt. Bad debt is that little plastic card everyone has and overuses. If you’re carrying debt on that, that’s not good. Good debt, you can use leverage to have your money grow it for your retirement, continue to allow it to support you, but you also get to have something like a house and live in it. And that house gets to appreciate in value. There are some tax properties that may be beneficial for you about having a mortgage. So it can be done correctly.

Tom Temin Because yes, the mortgage interest is deductible still under federal tax law. And so if you lose that you could have a greater tax liability from whatever income you have when you do retire.

Thiago Glieger That’s right. And I think a lot of people kind of forgot about the deductibility of the mortgage interest because standard deduction amounts have been so high. So unless they’re itemizing, they may not be getting that benefit. But I have to remind people that in two years, the law is set to go back to the original rule, where again, deductions will go down. And unless they change the law, that could be a very beneficial benefit for people again.

Tom Temin And people sometimes think, well, I’ll pay off the house, realize the appreciation. And there’s a pretty hefty capital gains avoidance that you have. Most normal people with normal houses will be under that limit and then buy a condo and then still have space I want and live rent free. Well, not so fast there either.

Thiago Glieger Right. And you always have to think about what are you trading? Or that liquidity. That paying off the full mortgage or just paying cash for another property and just having no mortgage at all, like something for a condo, for instance, you’re trading that liquid capital for illiquidity in real estate, as well as some reduced expenses, because then you don’t have that mortgage. But if you think about also what is the composition of a mortgage, it’s not entirely just the loan and the interest payment that you have. There’s really four parts to it. We call that Principal Interest Taxes and Insurance (PITI). So in even in your case when you’re describing a condo, somebody may not have a mortgage payment but you’re going to have HOA fees, you’re going to have condominium fees, you’re going to have the taxes in the insurance that you still owe each month.

Tom Temin Right. And sometimes a condo will come to you and say, guess what, we need a new roof. It’s $2 million, but we only have $500,000 in escrow for the roof. So everybody gets assessed up to up $10,000 out of nowhere to make sure the place doesn’t fall apart.

Thiago Glieger And that number is not out of the ordinary. I had a client just a few months ago come to us for $15,000 out of nowhere because, again, it was that situation where they needed to replace everything throughout the whole building. And it was a huge assessment.

Tom Temin Right. And especially in the age after the collapse of that condo in Florida, nobody wants to take a chance with a condo building if it’s more than two-storey high.

Thiago Glieger That’s right.

Tom Temin We’re speaking with Thiago Glieger, wealth advisor with RMG Advisors of Rockville, Maryland. So let’s presume then, that someone nevertheless wants to pay off their mortgage. What’s a good strategy for doing it? Where do you get the money to do it?

Thiago Glieger There’s a couple of questions I would want people to see themselves asking. And really the first is, if I do this, what are going to be the tax implications? If I’m going to take a large lump sum payment from my retirement accounts, that’s taxable like salary, just like ordinary income. And so the additional question here is beyond just the tax cost, how much potential future growth did you also cost yourself by not having this money anymore? Does this create any kind of risk in later retirement, because it’s a huge chunk of money that you’re not paying. So then other people may look at non retirement accounts like individual accounts, brokerage, joint, trusts. That comes with capital gains. So you have more control, and it is less taxes in ordinary income. And then sometimes people will say, well, you know what, this is what we have the Roth for. The Roth is totally tax free. It’s for surprise bills like this or something we can use, and we don’t have to worry about the tax. I don’t like people using the Roth for something like this, because the Roth is where you get all of your tax free growth. I’d like to see people using the Roth as kind of their growth vehicle for the future, so taking it and dumping it into a house may not be the best thing, but that’s usually the three options that people have.

Tom Temin Or you could win the lottery, I suppose. And then it doesn’t matter what happens. But if you do, then retain your house and the mortgage payments. If you can afford them, the question is if you can afford them before you retire, can you afford them after you retire that PITI payment? And that’s really the analysis you have to do, because it might be that you can totally handle it.

Thiago Glieger That’s right, exactly. And that’s the point here is I think a lot of people think they just can’t have a mortgage payment because their FERS and Social Security is not making up all of the income that they have from their salary. So they think, oh, well, our income is going down, so we must reduce our expenses. And that may not necessarily be true. If you’ve been a good saver throughout your career, then you might be sitting on a substantial chunk of change that you can use to continue to grow and invest for yourself. It continues to generate cash flow so you can keep making those mortgage payments, because you’re still generating a retirement paycheck at this point, it’s just not coming from the government.

Tom Temin I guess people might have the idea, well, we can partially pay it off with a chunk of the Roth or a chunk of the rainy day savings we have. But on the other hand, if you do that, you don’t really change your PITI payment, because the bank, the way they’ve rigged the mortgage system, pay all this interest until you pay off the principal.

Thiago Glieger And that’s why people really look to do a full payment, because you’re only free and clear of those interest payments. Once you clear that liability completely. And again, the challenge in doing these lump sum payments is that it affects something called your adjusted gross income. And not only do you pay higher taxes, potentially in that first year, you may have pushed yourself into a higher tax bracket for your first pension. So now there’s a bigger bite coming out of your annuity as well. This can also impact capital gains taxes. It could impact your Medicare Part B premiums. There’s a whole lot of other elements of a retirement plan that this one single move can have an impact negatively on. So you really have to be careful.

Tom Temin Most of the calculators online, where you plug in numbers to calculate whether you can retire or not or what your costs will be. There’s a lot they leave out, and one of the things they don’t have is tax. Because tax varies so widely by location, state you’re in municipality you’re in. This property taxes vary and then state taxes etc., etc.. Are there any sources of information to model what your taxes might look like? If I stay in my house, I pay this, that and the other for mortgage. Now here’s my income. That type of tax analysis.

Thiago Glieger Yeah. And the challenge Tom is needing to know a little bit about how the tax structure works. And I always encourage people, if you want to do some of this work, you can actually just go to the IRS website and look up the tax brackets and say, okay, if I generate this much in ordinary income, what is considered my marginal tax bracket, that’s the rate at which my next dollar is going to be taxed at. And this helps me to figure out if I take a lump sum from my TSP. That’s what my tax picture is going to look like. And then thinking about, all right, well, if I do this for next year, is that a year that’s going to be better for me because maybe I’m not working. Or do I want to do it this year because I have extra cash flow to be able to still contribute to the TSP, even on taking money out. So there’s some modeling that can be done. But you’re right, depending on how you file your taxes, depending on how you’re generating your income and retirement, which accounts you’re pulling the money from if you’re no longer earning a salary at this point, that’s all going to impact what that bottom line is for each individual family.

Tom Temin Yes, because you have to figure in your Social Security payments in there because that’s taxable since 1980. They’ve been taxing Social Security income, which kind of sounds absurd since you paid 6% tax on your income for your whole working life. And so did your employer or employers. And yet, it’s taxable.

Thiago Glieger Yeah, it’s tax on tax. And a lot of people don’t recognize that. They think Social Security is not taxed. But a good chunk of it is likely going to be taxed because you’ve got a first pension that essentially puts you in that you’ve already started with taxable income, which means your Social Security will be too.

Tom Temin All right. So bottom line then do some real analysis before you worry about paying off the mortgage on your house.

Thiago Glieger I really think it’s good to do some sort of financial modeling on this, because if you take out a huge swath of your money and now it belongs in a real estate property instead of your portfolio, what does that do to the longevity of your retirement plan. Do you still have sufficient liquid assets to be able to support your lifestyle for the rest of your life? And also understanding that there is some emotional component to this as well, if you are financially benefiting from keeping the mortgage, but it’s keeping you up, because you’re just stressed constantly, that’s not a successful retirement plan. And so I think taking an approach of understanding, I’ve shared with you the Venn diagram of what makes financial sense, of what really makes you happy. And retirement planning lives in the middle, because sometimes you have to do something that isn’t the squeezing the last drop of money out of the system, but it makes you incredibly happy and you’re fulfilled, and you’re happy to pass on a mortgage free property to your kids. That’s meaningful in a lot of different ways, too.

Tom Temin And if you do hang on to the house and you’ve got a mortgage and you’re in a reasonably sellable area, that’s always a God forbid option. You can always sell the house at some point and then realize that capital gains because it solves some other unanticipated problem. It may produce these new tax problems, but it solves whatever that came away that you never anticipated.

Thiago Glieger Right, exactly. You can create lines of credit against the house. You can sell the house, move to something smaller. And a lot of people will do that, especially as they phase their retirement because the house is too big. Maybe it doesn’t have everything they need to age in place, and so they find themselves moving somewhere else.

The post Why it pays to think twice about paying off that mortgage before retirement first appeared on Federal News Network.

• The Department of Veterans Affairs paid out $11 million in bonuses to career executives not eligible to receive them. Now a bipartisan group of lawmakers is seeking answers. House lawmakers are asking VA how long it will take to claw back those bonuses and what steps it will take to hold department leaders accountable. The lawmakers also want to know what steps VA will take to ensure future financial incentives are awarded responsibly.
  (Spanberger demands answers, accountability from VA over nearly $11 million misspent on executive bonuses - Rep. Abigail Spanberger (D-Va.))
• For the second time this week, a federal cybersecurity leader is heading out the door. Eric Goldstein, the executive assistant director for cybersecurity at the Cybersecurity and Infrastructure Security Agency, is leaving federal service after more than three years. CISA confirmed his last day will be in June, but didn't say exactly when. Goldstein's decision to leave government comes two days after Chris DeRusha, the federal chief information security officer, announced his decision to move on. CISA Director Jen Easterly praised Goldstein, saying through his leadership CISA pioneered new models of operational collaboration, reshaped its ability to detect and address cyber risks and shifted the balance toward building technology that is secure by design. A CISA spokesperson didn't say who would be acting in his place after Goldstein leaves.
  (Second senior cyber leader this week to exit federal service - Federal News Network)
• Transportation Security Administration employees are about to see major workforce changes. That is after TSA signed off on a new collective bargaining agreement with the American Federation of Government Employees. The seven-year contract offers more official time, sick leave, uniform allowances and much more. It also comes after TSA workers received a major pay bump last year. Altogether, it will have a massive positive impact, said TSA Administrator David Pekoske. “If we didn’t have this CBA, if we didn’t have this pay package, I would submit to you, we probably wouldn’t have a TSA in five or 10 years,” Pekoske said. Looking ahead, AFGE is now calling for the passage of a bill to further cement workforce rights at TSA.
  (TSA, AFGE see milestone contract as ‘pivot point’ for frontline workforce - Federal News Network)
• New legislation in the House calls for a crackdown on improper payments. Federal agencies made more than $230 billion in improper payments last year. A bipartisan bill seeks to rein in that wasteful spending. The Enhancing Improper Payment Accountability Act would subject federal spending programs to stricter reporting requirements if they pay out more than $100 million annually. It would also require agencies to report out their antifraud and risk management controls. Reps. Abigail Spanberger (D-Va.) and Blake Moore (R-Utah) are leading the bill.
  (Spanberger, Moore Introduce Bipartisan Legislation to Reduce Improper Payments, Strengthen Confidence in Federal Programs - Federal News Network)
• The White House wants agencies to consider social and behavioral science in policymaking. On Wednesday, the Biden administration released its Blueprint for the use of Social and Behavioral Science to Advance Evidence-Based Policymaking. Policymakers will have access to data used to measure the effectiveness of government services, and how they reach their intended targets, before developing programs. The blueprint provides a hundred examples of how social and behavioral science has been used to advance innovation and ensures that agencies will have the appropriate number of staff with the required expertise.
  (White House releases policymaking guide - Whitehouse.gov)
• The Technology Modernization Fund Board is making its first investment in generative artificial intelligence as part of awarding four new investments, worth $49.2 million, to three agencies yesterday. The State Department received its first two awards from the TMF, including $18.2 million to use GenAI in its data environment to improve the sharing and understanding of information among all of its offices around the world. The State Department also won funding to modernize its identity and access management tools. The National Oceanic and Atmospheric Administration and the Office of Federal Student Aid won the two awards from the TMF to modernize customer-facing systems. Since January 1, the TMF Board has made nine awards to eight agencies.
  (State, NOAA, Education win new IT modernization funding - Federal News Network)
• The Army is getting rid of its online training for enlisted troops. The service is eliminating the requirement for all enlisted soldiers to complete the Distributed Leader Course. Soldiers currently working on the courses will not be required to complete them. And soldiers who have not begun the training are no longer required to start. Enlisted soldiers were previously required to complete the courses before attending a noncommissioned officer academy.
  (Army eliminating Distributed Leader Course - U.S. Army)
• The Department of Veterans Affairs is trying to use a career development portal to boost its cyber workforce skills. The internal VA website includes training modules spanning 32 different cyber work roles across the agency. Through the portal, the VA is offering courses in IT, AI awareness and much more. VA employees can also take a self-assessment to decide what skills they can — and should — try to develop. The goal is two-fold: improve retention of the agency’s cyber employees, and close some of the VA's existing skills gaps in technology.
  (VA career development portal - Department of Veterans Affairs)
• The Department of Homeland Security will launch a cyber task force focused on artificial intelligence if a bipartisan bill makes it through Congress. The bill would require the Cybersecurity and Infrastructure Security Agency to lead a group to address safety and security challenges posed by AI. CISA’s AI task force would give annual updates on its work to Congress. Reps. Troy Carter (D-La.) and Bennie Thompson (D-Texas) introduced the bill.
  (Congressman Carter, Thompson Introduce CISA Securing AI Task Force Act - Rep. Troy Carter (D-La.))
• House lawmakers want to give personnel at the Office of Strategic Capital temporary assignments in the private sector. The House Armed Services Committee’s draft defense bill would require the Defense Department to establish a program under which the Office of Strategic Capital would arrange assignments for its employees at private companies, with the goal of improving their understanding of emerging defense industrial base capabilities and the role of venture capital in shaping future modernization requirements.
  (Lawmakers want to place Office of Strategic Capital employees in private companies - House Documents)

The post Spanberger demands VA clean up its act when awarding financial incentives first appeared on Federal News Network.

Leaders at TSA and AFGE signed off on a new seven-year collective bargaining agreement (CBA) Thursday afternoon, covering some 42,000 transportation security officers working in airports across the country. The agency and labor officials penned the document at a signing ceremony at John F. Kennedy International Airport in Queens, New York.

The new CBA replaces a previous and relatively limited labor-management agreement between the two parties. It also comes after TSA employees recently received, and later maintained, a substantial pay increase. Prior to those changes, the agency was struggling significantly with staff recruitment and retention.

“If we didn’t have this CBA, if we didn’t have this pay package, I would submit to you, we probably wouldn’t have a TSA in five or 10 years,” TSA Administrator David Pekoske said at Thursday’s signing ceremony. “That’s how important it is.”

The pay raises, which in some cases resulted in 31% salary boosts, brought TSA pay in line with the rest of the federal government. As a result, the agency is already reporting more interest in job openings, and drastically reduced attrition rates. In April, Pekoske told House lawmakers that staff attrition has fallen by 9% since the historic pay raises last year. TSA’s fiscal 2025 budget request includes funding to continue the raise, as well as provide more career development opportunities for agency employees.

Under the new agreement, transportation security officers will see a streamlined process for grievance and arbitration, expanded official time, fewer restrictions on sick leave, increased uniform allowances and opportunities for local collective bargaining. The new CBA expands the previous agreement from 14 articles, now to 37.

“These changes make TSA a place where Americans want to work,” AFGE National President Everett Kelley said at Wednesday’s signing ceremony. “It makes the TSA a place where anybody will want to come to work and feel like they are part of the team.”

At Thursday’s event, Pekoske told reporters that the latest Federal Employee Viewpoint Survey (FEVS) results showed the highest ever engagement and satisfaction in the agency’s history. Pekoske added that he hopes the new contract will set the stage for an even better labor-management relationship moving forward.

“I think what we ought to be thinking about is, where can we go from here? How can we continue this pivot to make sure that as an agency, every single one of us has a commitment to our people?” Pekoske said. “We should use [the CBA] as a pivot point to even greater relationships amongst all of us together.”

The agreement is a milestone for the agency, especially to employees who have been working at TSA for many years, and who have experienced a slow yet major shift in the ability for workers to organize.

“When I first started at the agency, we weren’t even allowed to join the union, much less bargain with the agency,” Mac Johnson, vice president of AFGE Council 100, said Thursday. “It took until 2007 for us to be able to join AFGE, and we weren’t even able to sit down at the table with TSA until 2011. This contract is the first one to be bargained with similar rights to Title 5. But our journey isn’t complete yet.”

Title 5 is the personnel system that sets pay, benefits and performance standards for the vast majority of federal employees. When Congress created TSA in 2002, it excluded the agency’s employees from the General Schedule pay scale and other provisions of the Title 5 personnel system.

In effect, the new collective bargaining agreement provides Title 5 protections to TSA workers, but AFGE leaders are already looking ahead to the next chapter. They are aiming to secure Title 5 rights for the long haul by putting Title 5 into law for TSA employees. That would cement many of the CBA’s new provisions, extending them beyond the seven years the contract will cover.

A new bicameral bill from Rep. Bennie Thompson (D-Miss.) and Sen. Brian Schatz (D-Hawaii) aims to accomplish just that. The Rights for the TSA Workforce Act, which the lawmakers introduced on May 14, would give all 60,000 TSA employees Title 5 protections. The legislation has gained both Democrat and Republican cosponsors.

In a video message at Thursday’s event, Thompson said the new collective bargaining agreement “will have a fundamental impact on TSA’s ability to recruit and maintain employees, and carry out its security mission,” but added that “there’s still work to be done. We need to ensure these improvements are made permanent in law so that no future administration can seek to undo them.”

The post TSA, AFGE see milestone contract as ‘pivot point’ for frontline workforce first appeared on Federal News Network.

The Department of Veterans Affairs would receive additional pay flexibilities for its health care workforce, if a sweeping legislative makes it through Congress.

Top lawmakers on the House and Senate committees introduced the Sen. Elizabeth Dole 21st Century Veterans Healthcare and Benefits Improvement Act on Tuesday.

In addition to pay and workforce provisions, the legislative package would set new requirements for the VA to meet before it resumes the rollout of a new Electronic Health Record, which remains on hold as the department addresses issues at sites already using the new system.

The legislation pulls together several bills lawmakers introduced this session of Congress to improve VA health care and benefits delivery.

Senate VA Committee Chairman Jon Tester (D-Mont.) said in a statement the bill is a “common-sense step towards delivering veterans and their families the kind of support they earned and deserve.”

House VA Committee Chairman Mike Bost (R-Ill.) said the bill reflects a year-and-a-half of feedback gathered from veterans and veterans service organizations “to find the gaps within VA’s services and consider commonsense legislation to improve them where we can.”

VA pay flexibilities & staffing updates

The legislative package would give VA additional flexibility to offer pay awards, as well as recruitment, retention and relocation bonuses to its health care workforce.

The bill would allow the VA to waive pay limitations for up to 300 personnel, “if deemed necessary for the recruitment or retention of critical health care personnel.”

The package would also require each VA physician, podiatrist, optometrist and dentist to receive an annual pay evaluation.  VA would have to give Congress an annual report on the outcome of these pay evaluations, and all resulting market pay adjustments.

The bill would also give the VA the authority to pay retroactive compensation to health care employees who exceeded annual pay caps between Jan. 8, 2006, and Dec. 31, 2017.

Lawmakers are also calling on the VA to keep Congress up to date on its staffing needs.

The bill would also require the VA to develop staffing models for its Office of Integrated Veteran Care, Veterans Integrated Services Networks (VISNs), and VA medical centers that will allow the department to “ensure timely access to care and to effectively oversee the provision of care.”

The VA would also have to submit annual reports to Congress and the Government Accountability Office on its efforts to meet these staffing targets.

The VA saw record hiring last year, and now has its largest health care workforce. However, the VA is limiting health care hiring this year to a few targeted areas.

By 2025, the department is looking to reduce its overall headcount by about 10,000 positions — most of them at the Veterans Health Administration. The department expects to manage this headcount reduction through attrition.

New requirements for Oracle-Cerner EHR

VA may also face new requirements to get the rollout of its Oracle-Cerner EHR back on track

The sweeping legislation also pulls together components of EHR reform bills that House and Senate VA committee leaders introduced in recent years.

The bill would restrict the VA from taking steps to roll out the new EHR to additional facilities, until the department submits data showing all facilities currently using the Oracle-Cerner system “have recovered to normal operational levels.”

If passed, the bill would require the VA to end its EHR Modernization Program within two years, unless the department certifies facilities using the Oracle-Cerner EHR have recovered, and that health care quality data shows steady improvement since the system went live at each facility.

The bill would give the VA 90 days to set health care quality metrics for the new EHR, “taking into account relevant differences in size, complexity, and market composition of VHA facilities.”

VHA would also have to certify the system is “fully and accurately built and configured,” that VA facility staff are ready to use the system and that the new EHR meets contractually required uptime requirements.

VA officials say the department’s most recent go-live of the Oracle-Cerner EHR at the Capt. James A. Lovell Federal Health Care Center in North Chicago has been the most successful go-live to date.

The VA is in a “reset” period, and will not roll the new EHR out to additional facilities until it addresses persistent issues at sites already using the system.

Since its first new EHR go-live, VA’s inspector general office has documented instances of the system contributing to patient harm.  The watchdog has also linked the EHR’s performance issues to veteran deaths.

VA Secretary Denis McDonough told members of the House VA Committee last month that the department does not anticipate staying in reset for the entirety of fiscal 2025.

“We’re not staying in reset forever. As we approach the end of this year, I anticipate us being in discussions to get out of reset,” McDonough told the committee.

VA’s 2025 budget request seeks $894 million for EHR modernization. It doesn’t include any funding for additional deployments. The funding would go toward contract payments to Oracle-Cerner, and infrastructure support for VA sites already using the new EHR.

If VA gets out of reset in 2025, and resumes deployment, McDonough told lawmakers that the VA has “prior appropriated money available to us to deploy when we get out of reset.”

The post Sweeping VA bill seeks more pay flexibility for health care workers, stricter EHR requirements first appeared on Federal News Network.

VA’s inspector general office, in a report released Thursday, found the department improperly awarded $10.8 million in critical skills incentives (CSIs) to more than 180 executives.

Congress authorized these incentives under the toxic-exposure PACT Act to help the VA retain employees with in-demand skills, or skills that are in short supply, and serve a mission-critical need.

VA OIG found a wider scope of improper bonuses than the department previously stated. The VA announced last September that it paid out $9.7 million in bonuses to 170 career executives at VA’s Central Office.

VA says more than 90% of critical skills incentives went to eligible recipients — including police officers, housekeepers and food service workers.

The department also continues to recoup bonuses it paid out in error. Investigators found the VA, so far, has paid $230 million of these incentives to non-executive employees in shortage positions.

VA Press Secretary Terrence Hayes said in a statement that the department “immediately cancelled and began recoupment for all CSI payments made to career senior executives at VA headquarters,” once the department discovered the error.

Hayes added that VA is revising and updating its CSI policies, “to ensure all future CSIs are awarded appropriately.”

“Moving forward, we will continue to work to ensure that everyone who receives a CSI meets the criteria to do so. This authority is critical to retaining and hiring VA public servants, especially at a time when we’re delivering more care and more benefits to more Veterans than ever before – and we will make sure that we are utilizing it effectively, correctly, and as responsible stewards of taxpayer money,” Hayes said.

House VA Committee Chairman Mike Bost (R-Ill.) said in a statement that “VA inappropriately used the money to line the pockets of VA executives to the detriment of VA’s workforce and the veterans they serve.”

“The over $10 million in overpayments to VA central office employees were not some type of administrative mistake – that’s a serious problem for the second largest agency in the federal government – and we’re going to get to the bottom of it come hell or high water,” Bost said.

‘I had no idea the sheer number of SESs’

Investigators found more than 80% of the improperly paid bonuses went to members of the Senior Executive Service at the Veterans Health Administration, and the rest went to executives at the Veterans Benefits Administration.

Under Secretary for Health Shereef Elnahal told investigators: “I had no idea the sheer number of SESs at VHA Central Office. I had no idea that we had upwards of 150 of them . . . I think if I had known that, my management instinct would be to get the same level of justifications together and the costs [as for the field executives].”

VA OIG found that VHA started developing its plan in late March 2023.

By early April, VHA workforce management staff prepared spreadsheets with all potential recipients of the critical skills incentive  — along with their salaries and the total amount they would receive as bonuses.

Investigators found VA Secretary Denis McDonough did not learn about these incentives going to department executives until September 13, 2023, when he was alerted by the department’s chief financial officer.

“VHA never disclosed to Secretary McDonough the details of VHA’s plan to pay CSIs to all VACO senior executives, despite specific requests from the secretary regarding the planned use of these incentives in the months before they were awarded,” the report states.

After learning about the executive bonuses, McDonough requested the Office of General Counsel review the payments.

McDonough told investigators: “One can surely read the statute to say that [incentive payments to executives and central office] would be allowable . . . [However,] I have a hard time reading the statute and concluding that every senior executive in central office qualifies for a CSI. And I think that’s functionally where we ended up on the decision . . . to cancel them.”

VA’s Office of General Counsel concluded the awards were improper because the groups had been defined too broadly, and recommended canceling the awards.

“While staff attorneys in OGC had reviewed the plans in June 2023, they were not provided all available information and may not have had the same broad perspective as the senior attorneys who later found the awards improper,” the report states.

Among its recommendations, VA OIG says McDonough “should take whatever administrative actions, if any, he deems appropriate related to the personnel involved in the process for granting CSIs for VA central office executives.”

‘The trust is absolutely shot’

VA sent collection notices in late October to all senior executives who received critical skills incentives.

Executives who received the notices had the option to repay the bonuses by Dec. 31, 2023, or agree to a payment plan to recoup the bonus amount before the end of the tax year.

However, VA OIG said its investigative team received information suggesting VA’s handling of the critical skills incentives “had significantly damaged the morale of its senior executives at the central office, and that several had experienced financial hardship as a result of having to repay the incentives.”

Investigators say two senior executives retired from VBA “as a direct result” of the situation.

Another VBA official, who retired in December 2023, told investigators that, although he had already planned to retire soon, the recoupment made his decision easier.”

“Folks don’t have this money that was given to them,” a VA executive said during an October 2023 town hall, according to investigators.  “Folks paid college tuition for their children. People paid off debt. People did all types of things to better their lives and now VA says we made an error [and we] want that money back. I think leadership really needs to see the human factor of what they’re doing because the accountability is gone, and the trust is absolutely shot.”

In addition to canceling and recouping the bonuses, McDonough rescinded his delegation of authority, which allowed VA under secretaries to approve their own senior executives’ awards.

The VA OIG found neither VHA nor VBA assessed whether the incentives it was paying to executives were necessary to retain them.

“VHA provided no market factors in support of its CSIs, and VBA’s justification was based on flawed assumptions, including that every senior executive was equivalent to a private sector CEO,” the report states.

Under Secretary for Benefits Joshua Jacobs told investigators that VBA’s “retention numbers are better than the six-year average” despite increasing workloads, which undercuts the proposed need for such a broad award of CSIs for retention.”

A senior executive in VA’s Human Resources and Administration/Operations, Security, and Preparedness office (HRA/OSP), who had concerns about the bonuses, said the approval process for these payouts paled in comparison to the requirements to justify much smaller incentives.

“I can’t even give a GS employee a special contribution award for $250 without writing an entire page about how great they are and forms and process. And this, with a stroke of a pen and three sentences, they’re saying these folks are critical because they’re critical, giving all these people this huge amount of money,” the official told investigators.

No executives at the National Cemetery Administration or any other VA program or staff office at VA headquarters received a critical skills incentive payment.

Under Secretary for Memorial Affairs Matthew Quinn told OIG investigators that NCA was aware of VHA and VBA’s plans to offer critical skills incentives to central office senior executives, but opted not to do so, because NCA didn’t have “a justifiable reason to do so.”

VA OIG notes that no political appointees or non-SES executives received these bonuses and that a “small number” of executives declined the critical skills incentives they were offered.

Senior HR personnel told investigators that the VA had broader and more flexible authority to offer critical skills incentives, compared to some of its other retention and recruitment incentives.

The Office of Personnel Management oversees those other retention incentives, and agencies can only offer them to employees who are considering leaving for private-sector positions — not other jobs within the federal government.

“CSIs are not subject to this restriction and may be paid to employees regardless of whether the risk of loss is to another federal agency or the private sector,” the report states.

VA may offer a critical skills incentive worth up to 25% of an employee’s basic pay. The report states seven senior VHA leaders were approved to receive incentives worth more than $100,000 each.

As these executive bonuses went through the approval process, a senior human resources official observed that with VHA’s proposed stacking of incentives, the salaries of some VA medical center directors could exceed a federal pay ceiling of $400,000 — the current salary of the president.

In order to receive the inventive payment, VA employees must sign an agreement to keep working at the VA for an “unspecified period.”

The critical skills incentive is set to expire on Sept. 30, 2027

The post VA paid nearly $11M in bonuses to ineligible executives, watchdog finds first appeared on Federal News Network.

• The head of the Transportation Security Administration said TSA’s recent salary increases are paying off, with staff attrition falling to nearly 9% since the historic pay raises last year. TSA Administrator David Pekoske, who testified before House lawmakers yesterday, said the agency's Federal Employee Viewpoint Survey scores are also improving. Last year’s pay raises brought TSA salaries in line with much of the rest of the federal workforce. And TSA’s budget request for 2025, includes $377 million to continue funding periodic pay raises and career ladder promotions.
  (Testimony of TSA Administrator David Pekoske - House Appropriations Committee)
• The Office of Personnel Management's top-most leadership position will soon be vacant. Kiran Ahuja is stepping down from her role as OPM director in early May. With nearly three years on the job, Ahuja is the longest-serving permanent OPM director in nearly a decade. Ahuja cited ongoing health concerns and a recent death in the family as the reasons behind her departure. OPM Deputy Director Rob Shriver will step in as the agency's acting director in the meantime.
  (Kiran Ahuja stepping down as OPM director - Federak News Network)
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  (DeJoy says USPS will fix ‘deteriorating’ service in regions facing network shakeup - Federal News Network )
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  (Air Force uses quick start authority to start new projects - Senate Armed Services Committee)
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  (Hearing on WEP and GPO - House Ways and Means Committee Social Security Subcommittee)
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  (Air Force pushing for transfer of Guard units to Space Force - Federal News Network)
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The post Since recent pay raise, fewer feds leaving TSA first appeared on Federal News Network.

The Department of Veterans Affairs is reviewing more than 4,000 positions at risk of a downgrade in their respective pay scales.

The six VA positions under review include a mix of white-collar General Schedule (GS) and blue-collar Wage Grade (WG) positions.

The American Federation of Government Employees (AFGE) estimates about 56% of VA employees in these 4,000 positions are veterans. Some of the positions under review cover VA employees who make less than $20 an hour.

The positions the VA is reviewing cover all 18 Veterans Integrated Services Networks (VISNs). More than 1,700 positions under review are located in the Veterans Health Administration’s Finance Revenue Operations and Procurement and Logistics Office.

AFGE says affected employees have received notices in the mail about the consistency reviews. But Thomas Dargon, supervisory attorney for AFGE’s National VA Council, said the union hasn’t received notice from the VA yet about any imminent downgrades.

However, if the VA decides to downgrade any of these positions, Dargon said the department will face an even harder time filling these positions.

“The bell’s already been rung here. I’ve seen the letters that have gone out to impacted employees, and VA doesn’t have a lot of answers to the questions they’re asking,” Dargon said.

The VA put a moratorium on downgrading employee positions in 2012, allowing the department to revise a national handbook, computer software and other administrative tasks to ensure it classified employees fairly and consistently.

The VA, however, ended that moratorium earlier this year, and is conducting “consistency reviews” on six of its occupations, at the direction of the Office of Personnel Management.

VA Press Secretary Terrence Hayes told Federal News Network in a statement that OPM directed the VA to conduct agency-wide consistency reviews of these six occupations, after VA employees appealed the classification of their positions to OPM.

OPM, following a classification oversight review of VA in spring 2023, determined that two positions, industrial hygienist GS-0690-12 and purchasing agent (prosthetics) GS-1105-06, were not properly classified at the correct grade level.

VA, in a memo obtained by Federal News Network, said its Office of the Chief Human Capital Officer, “is working to strengthen consistency and oversight of classification determinations across the department by taking action to ensure employees are in appropriately and consistently classified positions, reduce geographical and organizational pay disparities and decrease hiring times.”

The VA is conducting consistency reviews on the following positions:

• File Clerk (GS-0305-05 and above)
• Financial Accounts Assistant (GS-503-all grades)
• Industrial Hygienist (GS-0690-12 and above)
• Purchasing Agent (OA) (GS-1105-07 and above)
• Housekeeping Aid (WG-3 and above)
• Boiler Plant Operator (WG-5402-10 and above)

Reviews of these occupations will occur in two phases. The first phase of reviews began on March 1 and will conclude on April 26. The department will start a second phase on April 29, and complete the reviews by May 1. VA expects to submit all its reviews to OPM by May 1.

“VHA Consolidated Classification Units will be required to initiate a consistency review process, which will require the identification of [position descriptions] in need of review. [Position descriptions] determined not properly classified will be sunset through attrition and positions impacted will be recruited at the appropriate grade levels, as applicable,” the VA memo states.

Once VA conducts its consistency reviews, it will provide reports back to OPM on whether their internal findings demonstrated that those positions are properly classified as compared to OPM standards.

“From there, I suspect some decision will be made,” Dargon said. “AFGE has not been notified of any imminent downgrade at this point, but I do not suspect the consistency reviews to result in employees being upgraded.”

Dargon said AFGE “does not support any downgrade whatsoever, and that “there is already a significant pay disparity between the public sector and the private sector.”

“VA has a notoriously difficult time not only recruiting, but retaining employees, and downgrading these positions is not going to make it any easier to fill them. And it is not going to bolster morale in the workplace,” Dargon said.

Hayes told Federal News Network that the VA issued a letter temporarily suspending changes to lower grade actions on June 29, 2012. Hayes said OPM assessed VA’s classification process in March 2023, and in September 2023, “determined there were no barriers prohibiting VA from conducting the reviews.”

VA, he added, expects to complete its consistency reviews of these positions by May 31.

“Should the reviews conclude that any positions were improperly classified, VA will consider all potential options to correct this misclassification,” Hayes said. “VA will do all we can to mitigate any potential adverse impact to our current employees. VA is committed to partnering with OPM to update classification standards and ensure they reflect the work done at VA and across the federal government.”

According to slides obtained by Federal News Network from a VA briefing presentation, VHA directed its Workforce Management and Consulting Office to cancel any VHA job opportunity announcements (JOAs) for occupations and grades that are subject to the consistency reviews.

As part of the consistency reviews, VHA classifiers will take a closer look at the qualifications required to perform the work for each occupation, and whether the agency has properly applied OPM’s classification or job-grading standards.

Classifiers cannot compare these six positions to other VA jobs or positions, consider any qualifications the employee has that are not required to perform the job, or account for how well an employee performs the work or the amount of work the employee performs.

“The goal of a classification consistency review is to ensure positions are classified in compliance with OPM classification standards and graded consistently VHA-wide,” the presentation slides state.

VHA is outlining “mitigation strategies” for pay-related staffing challenges. They include supplementing the base pay of these six positions with recruitment and retention incentives — such as critical skills incentives and special salary rates available under the toxic-exposure PACT Act.

“I can appreciate that the HR community at VA is trying to create a soft landing for employees who may be impacted by these downgrades through various recruitment and retention incentives, or ‘mitigation strategies,’ as they call them. But that’s not good enough, Dargon said. “There’s no reason to downgrade these employees, to make these positions harder to fill than they already are.”

Under Secretary for Heath Shereef Elnahal included housekeepers as part of a “Big Seven” list of occupations outlined in the VHA’s top hiring priorities in 2023. Those “Big Seven” positions cover VHA jobs that have a direct impact on patient care — and include physicians, nurses, licensed practical nurses, nursing assistants and food service workers.

Dargon warned that any potential reduction in pay for housekeepers would “be felt very quickly and sharply by folks in that field.” He said VA housekeepers in Pittsburgh, for example, are currently making about $16 an hour.

“These jobs are difficult to fill, and it’s difficult to retain workers,” Dargon said. “We have people who have military backgrounds themselves, who are veterans coming back to the VA, continue giving back, who believe in the mission, who are making just over $15, $16, $17 an hour — and you’ve got VA considering a downgrade.”

Dargon said the VA, by sending these letters to impacted employees, puts them in a position of “feeling undervalued or not seen.”

“Housekeeping aids are very much the backbone of health care institutions. You do not need to be a nurse or a doctor to be considered a vitally important part of the healthcare system that is VA,” he said. “Telling those employees who are working, in some instances, in really difficult environments, every hour of the day, to keep the VA clean and safe, that their position is actually compensated too highly — I can’t imagine what that feels like.”

Dargon said that if VA were to downgrade any of these occupations, it would probably lead to the department contracting out more of this work, “because the positions have become so unattractive through pay or other working conditions.”

VA saw record hiring last year, but is now looking to manage the size of its largest-ever health care workforce.

VA in its fiscal 2025 budget request plans to reduce its total workforce headcount by 10,000 positions. Most of the workforce reduction would come from VHA.

VHA Chief Financial Officer Laura Duke told reporters last month that the workforce reduction is necessary, because the agency far exceeded its hiring goals last year, and because it’s seeing higher-than-expected retention rates.

VHA earlier this year rescinded some temporary and final job offers to prospective hires. But the agency later issued a memo, telling leadership and HR officials to only rescind job offers as an “action of last resort.”

AFGE and VA finalized a new labor agreement last August, updating the terms of their labor contract for the first time in more than a decade.

VA Secretary Denis McDonough, at the signing ceremony, said the new contract would help with “easing the process by which we can fill vacancies,” and will allow the department to make new hires more quickly.

Dargon, however, said recent events suggest the VA is no longer making an effective pitch to prospective hires.

“I was on the negotiating team for the master agreement, and sat at the bargaining table with department officials who insisted that the reason they could not quickly hire employees was because of the provisions in the collective bargaining agreement — that it took too long that these were hurdles or impediments to quick hiring. We knew that was never the case, but we agreed to certain revisions in our contract to allow for more streamlined hiring procedures,” Dargon said. “Now they’re telling us they’ve hired too many people, maybe they’re not going to hire as quickly, they’re not going to fill vacancies through attrition. And now we’re looking at existing positions, and the idea of downgrading them.”

The post VA reviewing 4,000 positions at risk of pay downgrade first appeared on Federal News Network.