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Going postal over federal pensions

By Barbara Whelehan · Bankrate.com
Friday, March 25, 2011
Posted: 3 pm ET

Not too long ago, if you had a job at the post office, you took job security for granted. But yesterday the postmaster general announced layoffs for 7,500 positions. Those who are age 50 with 20 years of service are eligible for early retirement packages -- $20,000 to be paid out over two years. A pittance, if you ask me.

Thank heavens postal workers participate in the federal retirement program. But if two senators have their way, future federal workers won't have cushy pension plans to rely on.

Last week Sen. Richard Burr, R-N.C., and Sen. Tom Coburn, R-Okla., introduced the Public-Private Employee Retirement Act of 2011 as a way to address the country's debt problems. While the legislation would end the defined benefit plan for future government workers beginning in 2013, it would not affect current employees and retirees. And it would leave in place the Thrift Savings Plan, which is the government version of the 401(k) plan -- only much better.

"Right now, federal government workers receive far more generous retirement benefits than private sector employees," said Burr in a press release posted on his website. "We cannot ask taxpayers to continue to foot the bill for public employee benefits that are far more generous than their own."

The federal retirement plan

You hear every day about the tremendous financial strain that state pension plans are under. But you don't hear much about the Federal Employees Retirement System, or FERS. Members of Congress have access to really good retirement bennies after only five years of service, though this would no longer be the case if this legislation actually passes. My bet is that it most assuredly will not.

But it does seem unfair that federal workers don't even have to do any retirement planning, compared to those in the private sector. The proverbial three-legged stool on which most Americans are supposed to base their retirements are wobbly at best. The legs consist of Social Security, pension benefits and savings. Since most Americans in the private sector don't have pensions, (or if they do, they are often inferior hybrids like cash-balance plans), their retirement plans are teetering on a two-legged stool.

But federal employees have stools with three legs made of solid mahogany. In the FERS, government employees contribute 0.8 percent of pay while their employing agencies put in 11 percent of pay (the amount may vary slightly from year to year). Members of Congress and their staff pay 1.3 percent toward FERS coverage, and "the Congress pays approximately 16 percent of payroll as the employer contribution," according to a CRS Report for Congress.

On top of that, federal employees can contribute to a Thrift Savings Plan and get a 5 percent matching contribution from their employing agency. This match is immediately vested to boot. According to the CRS report, "All participants in FERS are immediately vested in their own contributions and in government matching contributions to the TSP, as well as any investment earnings on these contributions."

And the third leg for most federal employees is Social Security. If it gives you any comfort, they contribute to FICA to the same extent that everyone else does.

Disgruntled government workers

As you can imagine, federal workers are all fired up about this bill, judging from the comments on various blog posts. Governmentexecutive.com quotes John Gage, national president of the American Federation of Government Employees, as saying the bill is "cruel and useless."

"Sen. Burr's bill is a mean-spirited attempt to deprive future employees of any hope of a dignified retirement after they have spent a lifetime in public service," Gage was quoted as saying.

It's interesting to read comments posted by government workers. On starnewsonline.com, William Shipman says he finds the bill appalling. "While there may be some disparity between public and private employees, is it the fault of those who serve the public good that private employers have mismanaged private pensions to leave them unfunded and force their employees to trade a secure retirement for the casino that is the stock market?"

That's the casino where I put my chips.

How do you feel about the federal retirement program? Are you envious? Angry? Unaffected?

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Check out Bankrate's Retirement Realities series. We'll be adding stories to it throughout the year.

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226 Comments
George S
May 23, 2011 at 5:41 pm

What I'm hearing is this:

Let's drag everyone else down into the hole we're in. If they have a pension, let's take it away.

What's next? I'm afraid it's going to be: If they have social security, let's take it away! If they have savings, let's take it away!

sam
May 22, 2011 at 10:13 pm

you need to blame the right people for this problem. its not the federal employees that serve you, its wall street! they put this country in this mess and not one of them have been convicted of anything. most of you has the same oppertunity as i did to get a federal job but you chose not to and trusted your employers who just want you to go to hell and take your jobs oversees. Why haven't you as a reporter asked why no charges have been filed against one since the mortgage mess began? working for the federal government is not a walk in the park people we are under more supervisors and policy's then you have. and we have to answer to you! So if you want to blame someone go after the wall street crooks not the people that serve you from the post office to the VA and more.

Lynn Lloyd
May 20, 2011 at 8:20 am

The place to begin pension reform is in the congress. Delete that scheme right now and make them pay in for a retirement length-of-service scale. That is where the freeloading is obscene.

Brian S.
May 19, 2011 at 9:21 am

Go Barbara. The pie in the sky pollyannas and union boo-hooers just don't get it and never will. Cut them off and make them pay their fair share. The postal workers are just one more example of why our system is broken and the USPS, though technically not a federally funded entity, can never ever seem to operate in the black, no matter how many reforms they put in. And even though they aren't run by federal tax dollars, their pensions sure are.

RetiredPostie
May 18, 2011 at 8:49 pm

sKiZo: Retired Postal employees under FERS are subsidized by federal dollars. I contributed to my own retirement, plus the Thrift Savings Plan. When I retired I had a choice to combine my military retirement into Civil Service Retirement. I elected not to do that and therefore I receive a nice tidy stipend from Civil Service Retirement, the U.S. Army for 22 years service, and Social Security which I've paid into since I was 15.5 years old. There is no offset either. Postal employees receive the same pay regardless of their location, however, they also receive a cost of living allowance every year. That means that a Mail Carrier in Chicken Scratch, AL is living large while the same employee is living low in New York City. It all depends on what city you are working in. Most people stick it out with the USPS because of the benefits (health care, pay, sick leave, annual leave, and of course retirement). They put up with a lot of unecessary crap in order to retire. It's as if the Postal managers want you to just up and quit or get fired.

RetiredPostie
May 18, 2011 at 8:47 pm

sKiZo: Retired Postal employees under FERS are subsidized by federal dollars. I contributed to my own retirement, plus the Thrift Savings Plan. When I retired I had a choice to combine my military retirement into Civil Service Retirement. I elected not to do that and therefore I receive a nice tidy stipend from Civil Service Retirement, the U.S. Army for 22 years service, and Social Security which I've paid into since I was 15.5 years old. There is no offset either. Postal employees receive the same pay regardless of their location, however, they also receive a cost of living allowance every year. That means that a Mail Carrier in Chicken Scratch, AL is living large while the same employee is living low in New York City. It all depends on what city you are working in. Most people stick it out with the USPS