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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?

***

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

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226 Comments
William Harris
May 11, 2011 at 10:46 pm

FERS is probably no good. I retired in 1987 and the Federal Government screws us too. The Government Off-Set keeps me from drawing Social Security off my Spouse who gets Social Security. Health insurance eats up all the cost of living increases we get in pay. None in the last two years. Health insurance kept going up though. Make less take home pay now than I did in 2004 because of high health insurance. The Republicans are crazy that want to cut these benefits more. I have a friend who retired from private industry and he takes home more now than he did when he worked. He gets a Teamsters retirement check, a company retirement check and a Social Security retirement check. His wife gets a Social Security check off his and she never worked. We Civil Service retirees cannot get a Social Security check off our spouses that worked private industry and draws a Social Security check. All Federal Employee Retirees are getting screwed over by the Federal Government. What happened to the 5th Admendment. The Federal Government will not deprive anyone of a Property Right. Or Equal Protection of the Laws. I though the 5th Admendment was a Law in the Constitution. Money (a retirement check) is property.

William Harris
May 11, 2011 at 10:28 pm

I don't know who told these crazy Republicans that Federal Retired people get a good retirement income. I retired in 1987 and my net take home pay is still less than I took home working as a WG10, Step 5, Civil Service, machinist for the Air Force. That was many years ago. A common sense person would think that the cost of living increases would have resulted in taking home more in pay by now, BUT, The Federal Government has been screwing over Federal retired and disabled employees since Reagan was President. Since 2004, my net take home pay is less than it was in 2004. That was seven years ago. The reason why. High health insurance and very low cost of living increases in pay or no cost of living increase in pay. Like the last two years. NONE. Has the cost of living went up in the last two years?

cygnusryder
May 11, 2011 at 8:44 pm

@Joe - I am sick of hearing the "you people need to be dragged down with me" complex. That sounds suspiciously like "misery loves company". I have worked in private and public sector, and never begrudge anyone's choice. In the end, we are ALL workers and we ALL contribute to the economy. And whether you wish to admit it or not, the government does provide some services that you cannot live without.

Scapegoat
May 11, 2011 at 7:19 pm

I paid in 7% of my pay for 35 years to the Civil Service Retirement System (CSRS). Yes it is a good retirement system but government "bennies" are not quite as good as some seem to think. Under CSRS one had to be at least 55 years old and have at least 30 years' service to retire with full benefits. I did just that with 35 years. I pay over $400 a month for my hospital insurance and $115 per month for my Medicare part B. I have relatives and friends under Social Security who draw a good annuity, pay much less for their insurance and don't have to read all this crap about how they are so much better off than everyone else. Also, TSP can be good or bad, depending on the investment choices one makes (safe or risky).

Mensaman
May 11, 2011 at 5:19 pm

I have the three legged stool and get a gov't pension, social security and 401K. However, I am a very rare case.
You did not mention some hard facts. First, not all FERS or CRS pension people get social security or contribute to social security.
There is something called GPO Gov't Pension Offset which prohibits you from collecting full SS if you have a gov't pension. You painted a false picture of federal retirement. I hope you will dig deeper and correct the article.
Most folks are simply retiring on 55% of salary and not much else. The Thrift plan was only in the last 20 years as well.

Joe
May 11, 2011 at 7:10 am

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.

(The private sector got the 'rug pulled' out from underneath them.. so join.. the club.. government workers..

pat
May 10, 2011 at 9:01 pm

The post office lost 200 Billion in the last three years is still funding pensions?

Roger
May 10, 2011 at 8:45 pm

Why is it that those in power always like to recommend taking money and benefits away from the regular worker. I'm sure that Sen. Richard Burr, R-N.C., and Sen. Tom Coburn, R-Okla and the others (democrat and republican) have not considered reducing congressional benefits and pay. Most people don't realize that they will have full medical and full congressional pay upon their leaving office with cost of living raises. And if they were a governor or representative or cabinet member,etc. they have separate retirements and benefits for these positions.

I recommend we start trimming the fat at the highest levels first. Think of the billions the taxpayers would save. They should have the same rules to follow that we do. I bet they wouldn't want to stay in office long for minimal pay and minimal health insurance, transportation, living arrangements, etc.

NBLVABL
May 10, 2011 at 7:02 pm

Geeze, folks let's get along. Remember that thing called "choice"? Well, we all make it and have to live with the choices we make and last I checked everyone makes there own (more or less).

If you are unhappy with private pensions get a Federal job and work towards that pension.

Better be fast...

BTW, for those who must continue to stir up things....have some heart! For those who have too much time on your hands either go after the folks who only have to work one term to get these fab benes or run yourselves.

One thing everyone should keep in mind - stay away from military benes unless you are championing improvements.

lee griffiths
May 10, 2011 at 5:33 pm

those people who try to relate goverment pension and postal pensions as being the same are just plain stupid. the postal service has its own pension plan and comes from the employees own pay. and you republicans who keep trying to make the post office a scape goat for your own purposes,your much loved ronald reagan is the one responsable for changing the postal retirement program to what it is today.