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What’s fair for government workers

By Barbara Whelehan · Bankrate.com
Friday, November 23, 2012
Posted: 6 am ET

Many people begrudge government employees for the secure pensions they get after a lifetime of service as public workers. But many people don't realize that state and local workers in certain states don't contribute to Social Security, so their pensions are all they get.

"Fairness is a particularly important issue in states like California, Connecticut, Massachusetts, Illinois, Louisiana and Ohio, where one or more of the large retirement systems do not participate in Social Security," according to a new report from the Center for Retirement Research at Boston College. "With no Social Security and long vesting periods, short-service workers can leave with no benefits of any kind for their time spent in public employment."

That leaves a big retirement planning gap for those who spend a portion of their career in public service. Since Social Security benefits are based on the 35 highest-earning years after age 21, public workers who didn't pay into the system for a number of years but who are eligible for Social Security will get a reduced benefit amount when they reach retirement age.

Grass always looks greener elsewhere

The report finds that nearly half of government workers -- 47 percent -- leave their jobs with no promise of future benefits. It argues for the availability of defined contribution plans -- 401(k), 403(b) or 457 plans -- for public workers.

The current pension plan among state and local government workers requires tenure of a minimum of five years. Someone who works for five years beginning at age 35 as a middle school teacher, for example, will get just 6 percent of their pay when they retire. That may be enough to pay the bundled phone and cable bill at retirement, but not much more.

After 10 years, they get 14 percent of pay; after 15 years, 44 percent. Once you're in it's hard to leave, since the benefits only get richer as you invest more time at the job. If you don't like your line of work, you're stuck, serving a sort of prison term for the promise of that pension check.

Besides the requirement for long tenure to get vested, the benefits are back-loaded, meaning they're based on the three to five years of highest earnings, which generally occur at the end of a career. "An employee starting at 35 with a 30-year career will earn more than 30 percent of lifetime pension benefits in the last five years of employment," according to the report, which is titled "The impact of long vesting periods on state and local workers."

Government workers typically contribute 5.5 percent of their salary in these plans, according to the report. They should at the very least have the option to contribute to a defined contribution plan. But in those states where Social Security protections aren't in place, government workers should also have a choice of whether they wish to participate in the pension plan or in the Social Security system. That would seem more fair.

What do you think?

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37 Comments
JerseyGal
November 23, 2012 at 2:24 pm

I appreciate the above comments. I am a retired Federal Employee with 33 years 6 months of federal service under CSRS.

Prior to my employment with the Federal Government I worked for ten years in private industry in the 1960's. I paid into Social Security and never married and do not have children.

Because of the Windfall Elmination thanks to the late President Ronald Regan, I cannot collect my full social security because I receive a federal pension.

I have not taken my social security as of yet. When I called the Social Security Office they said my monthly payment would be about $360 instead of the almost $800 that is on my statement because of the windfall elimination.

President Obama please do something about this situation for soo many federal employees experiencing this dilemna.

This is my money and I should have the right to collect the full amount.

Thank you,

Lynn
November 23, 2012 at 2:14 pm

I was in the private sector for 20 years, with two companies who offered retirement plans. We weren't vested until after 10 years. I left the first one after 11 years, and bought out my retirement. I left the second company after 9 years. I am on Social Security now, and working part time to make ends meet. My IRA's help.
I think all Fed. gov. workers, including Senators and Reps should be on the samet retirment plan. State, county, and city employees should have the same plans within their states. All should be able to pay into Social Security.

Jim
November 23, 2012 at 2:11 pm

I agree with Joanne. I'm retired from the Postal Service, covered by CSRS, and I have worked in the private sector, covered under SS and because I worked under CSRS for 36 years I draw only a fraction, barely enough to cover my Medicare each month. Yes, I do have good medical insurance as well as Medicare but I pay for it out of my retirement check. Also someone retired under CSRS cannot draw SS benefits from their spouse.

Ray
November 23, 2012 at 2:07 pm

Government workers' compensation need to be aligned with the private sector. This could mean higher pay (where appropriate), and a defined contribution plan (with match where appropriate) rather than relying on the government to make appropriate contributions (like in Illinois where the pension system is 43% funded!).

Dain Anderson
November 23, 2012 at 2:00 pm

My brother worked for the State of New York and when he retired back in 2003 he got about $3 grand every 2 weeks in retirement and had medical insurance paid for on top of that. He was 56 years old at the time of his retirement, and had over 35 years in too!!! After he got done working for the State of New York he went into the private sector and was making roughly $1500 a week there also!! He could have retired from the private company at age 65 and got 2 pensions and Social Security, Plus ALL his state medical benefits paid for yet!!! I'm a Disabled Veteran and have had to fight tooth and nail just to get where I'm at now. I'm 80% service connected and 100% compensated because I am Unemployable due to my disabilities, I get roughly $2800 a month!

Vic
November 23, 2012 at 1:50 pm

Private industry decided more than 20 years ago that traditional pension systems are not financially feasible on a long term basis (that is: the company goes broke eventually). So, they went to the defined contribution plans.
The time is long past for federal, state and local government employees (all -- including senators, representatives presidents) to adopt the same (on a phased in basis). If this is not done, the same thing will happen to the United States economy. The debt will eventually (getting closer year by year) destroy the economy (that is: we'll go broke).
To see what it will be like, look at what is happening in Greece, Spain and many other European countries. Ramapant inflation (loss of buying power of currency), riots in the streets, shortages of food and basic supplies, work stopages,
etc. etc. etc.
It is only a question of time if we do not act!

Dan
November 23, 2012 at 1:43 pm

No sympathy here either. In colorado the only people retiring in their early fifties are pera recipients. They padded their last few years and now sit back begrudging social security as an entitlement for the rest of us working into our sixties.

Joanne
November 23, 2012 at 1:19 pm

For those who think federal employees are more well off, think again. Prior to 1984, the Civil Service Retirement System (CSRS)was the only retirement system. In 1984, the Federal Employees Retirement System (FERS) was mandated as the only retirement system, where employees pay into Social Security. CSRS employees were offered to switch to FERS on two different occasions. FERS offers a "small" retirement check and retirees have to depend on their Thrift Savings Plan also known as 401 K and their social security. In 2013, newly hired federal employees will have to pay more into their 401K but it's not certain if they will get more when they retire. All in all, those in CSRS are collecting more, but for FERS it's a different story. The age for retirement for CSRS is 55 with 30 years federal service. This is a reduced annuity, an individual would only received 56% of his/her salary. Also, some people are mis-informed that federal employees have great benefits and get them for free, sorry wrong again, they are deducted from one's salary.

Ringer
November 23, 2012 at 1:16 pm

Many public employees purposely and with the complicit consent of management wink wink pad their last years with over time to distort their actual earnings resulting in a handsome pension not seen in the private sector, once you reach age everybody can collect social security whether you contributed or not. In the private sector you work until you drop. No sympathy here.

Mary
November 23, 2012 at 1:12 pm

I worked for the federal govt for 36 yrs and paid into my retirement at approx 6-7% all those years. In addition, I worked during those same years in part-time work paying into Social Security. After I was forced into retirement, as we closed our doors to merge with another operation located in another state, I continued to work part-time just to get my 40 quarters in Social Security. With my govt pension, I net $2446/month, after paying fed, state taxes & health & dental insurance. In addition, Social Security pays my Medicare B, and gives me the balance of $35 in a monthly check. We only get a cost of living raise if the Social Security recipients get a cost of living raise, which will be 1.7% this January 2013. I paid into Social Security just like everyone else but my benefit is cut due to collecting a fed pension and they tell me that I can't get back any of the money that I paid into Social Security. Thanks to Congress, that's what I have to accept, like it or not, whereby Congress has their own pension plan, their own health insurance plan, etc. Why aren't they under the same pension plans and benefits as we govt retirees. No, they just voted that this is all we could get, but they are not subjective to the same. My ex-husband collects more in his pension and additionally gets all the Social Security that he is entitled to, the sum of both is at least 33-40% more than I get. Additionally, even though we were married over 10 yrs, I am told that I make too much in my retirement to be able to collect any part of his Social Security with the formula that they use for govt retirees. The same goes if he dies. I have a girl friend that was able to collect more than $1300 monthly from her ex-husband's Social Security when he died. At the time he had remarried and had a child and both present and past wives collected. I guess that's where all the money I paid into Social Security goes, thanks to Congress and the laws they passed which don't apply to them. Where is this fair???