Government Spending

Federal Pensions Are a Sweetheart Deal That Needs to Be Soured

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Hey readers, how much is your employer kicking in to your retirement account? Here's a summary of what federal workers get:

Created in 1986, the system features a thrift savings program similar to a 401(k) retirement account and a traditional, defined-benefit pension, which is fast disappearing at private companies. The system provides benefits that are slightly "more generous than what most other middle-class families receive in retirement," the brief says, but federal employees contribute strikingly little. Just $1 of every $15 paid into the pension plan, known as the Federal Employment Retirement System or FERS, comes from workers' paychecks.

Overall, Third Way calculates that federal taxpayers are far more generous to their employees than private-sector companies, contributing 12.7 percent of payroll to retirement accounts vs. 5.3 percent in the private sector….

House Republicans picked up Third Way's proposal to require workers to contribute 6 percent of salary to FERS, equalizing payments with the federal government. Because workers currently contribute 0.8 percent, the change would amount to more than a 5 percent pay cut.

Federal employee unions dispute the need for adjustments, arguing that FERS is already significantly less generous than its predecessor, the Civil Service Retirement System. CSRS paid retirees $2,587 per month on average in 2007, versus $944 for FERS, according to the National Treasury Employees Union, one of the largest representing federal workers. And unlike many state employee pension systems, FERS is fully funded.

"We're sort of surprised, actually, to see the attacks on this as if it were some kind of a gold-plated system," said Gilman, the union legislative director.

More here, from a Wash Post article.

You've got to kind of love Gilman's comment: How can you call a system that gives federal workers more than twice as much in a match than private sector workers get gold-plated? Especially given the unambiguous evidence that federal workers make more than their private-sector counterparts in 83 percent of comparable occupations and in hourly breakdowns too. That's chutzpah with a capital HUT!

The plan to have federal workers kick in more to their retirement accounts is likely to move forward pretty far in talks about trimming federal expenses. It makes sense not just bring pay scales into line with the private sector but the conposition of compensation.

More info on public-sector compensation here.

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  1. “How can you call a system that gives federal workers more than twice as much in a match than private sector workers?”

    Is it me, or did Gillespie Sugarfree this sentence?

    1. Yup, and just fixed it, I think.

      1. “How can you NOT call a system that gives federal workers more than twice as much in a match than private sector workers GOLD-PLATED.

  2. Federal employee unions dispute the need for adjustments, arguing that FERS is already significantly less generous than its predecessor, the Civil Service Retirement System.

    Non sequitur of the morning.

    1. It is not a non sequiter at all. It is much less generous than the older system. Now that doesn’t necessarily mean that the system doesn’t need adjustment. But it is a reasonable, if losing argument to say “hey this used to be worse”.

      1. In comparing the current deal against the market, saying the current deal used to be much better is a non sequitur. It doesn’t answer the issue at all.

        1. No. In order for it to be a non sequitur the fact that it is better than the old system would have to be irrelevant to the discussion. A non sequiter would be “we can’t change the system because lots of federal employees are Redskins fans”. The fact that they are Redskins fans is says nothing about the need to change the system. In contrast, the fact that the system was cut just a generation ago is evidence that perhaps it is not too generous. Not dispositive, but relevant.

          God this is turned into a nerd fight.

          1. I rule in favor of John. Argument is crappy but is sequitur.

      2. No, it *sounds* reasonable which is why they made the argument, but it is in fact still a non-sequitur. They can say that the new system is better than the old system, but IT DOES NOT FOLLOW that the new system is appropriate.

  3. in Dept of Trans. workers making over $100,000 in 2008 was under 100. 2010 was over 1,500.
    and people STILL approve of Owebama…

  4. Just $1 of every $15 paid into the pension plan, known as the Federal Employment Retirement System or FERS, comes from workers’ paychecks.

    Goddamn but our masters are good to themselves!

    1. gee ya think there is wage inflation at the top? in the private sector our utility company president just under 20 years ago retired with a 30k a MONTH pension. The new guy will do considerably more. You go after the public sector when the compensation for just one of a monopoly corporation underling is more than the entire annual pension benefit for a public sector worker

  5. “the change would amount to more than a 5 percent pay cut.”

    No. When your employer changes the way it figures total compensation, that isn’t a pay cut. It wasn’t YOUR money before.

    1. how is it a pay cut when it goes into THEIR retirement account…

      1. When they demand an 8% pay raise, and instead their paychecks increase by 3%, they complain of a 5% pay cut.

    2. It is a pay cut. A deserved pay cut, but a pay cut nonetheless. Retirement plans are a part of compensation. If your employer cuts contributions to your retirement plan, that’s a pay cut.

      1. What if they pass through an insurance hike? Its the same thing.

  6. Wow, I never really thought about it liek that.

    http://www.total-anon.us.tc

  7. I’d like to see where the fed government rates on this along with other major companies in the US rather than just with the “private sector average.” Bigger companies tend to have better benefits and like it or not the federal government is a big enterprise.

    1. I worked for the largest shipping company in the world. They’d match up to 7% in the 401(k). Best deal I’ve seen. Was still a dollar-for-dollar match up to 7%, not a give away.

    2. I work for a company that has been rated “best to work for” by Fortune magazine several times. 15% 401(k) matching. Generous, but nowhere near the Federal benefit.

    3. 80,000+ employees. Dollar-for-dollar matching up to 4% of your salary.

    4. I’ve never heard of a company that does better than dollar-for-dollar matching for defined contribution plans. My outfit has one of the richest benefit packages in the hospital industry, and we only match 50%.

      As far as defined benefit plans go, by definition any employer that offers them is offering a richer package than the private sector, where they have virtually disappeared (with the exception of union shops, of course).

  8. I’m sure that the feds have a much sweeter deal than Cooter’s Garage or Norman’s Lil’ Software Start Up That Could, but is it sweeter than Google?

    1. Yes.

        1. There’s a search service you can use to easily find that information. Can’t remember it’s name at the moment.

          1. Can you provide a link to that search service?

            1. Googling “google benefits” turns up a google page with this info:

              Google 401(k) Plan

              Employees may contribute up to 60% and receive a Google match of up to the greater of (a) 100% of your contribution up to $3,000 or (b) 50% of your contribution up to $8,250 per year with no vesting schedule!

              The page url, which I’m too lazy to format as a proper link, is:

              http://www.google.com/intl/en/…../benefits/

              1. I guess the commenting software auto-detected the link for me. Thank you, squirrels.

  9. A lot of fed employees don’t get social security, does that figure in?

    1. I don’t know, can private employers opt out if they provide sufficiently lavish compensation earmarked such that their employees can’t get at it until after they retire?

    2. They don’t pay in, either, It’s an interesting question, though

      Right off their pay is 15% higher than their private sector counterparts. I’m not sure how balance that with the fact that they don’t have an unfunded, unenforceable pension promise (which is what SocSec is), though.

      1. Many state employees nationally but not all, contribute also to social security as well, effectively reducing take home pay there as well. Just remember, when Reagan came into office he promised to fix the boomer issue and social security by increasing the payroll tax to give the system a fund to use for the boomer bump….too bad both the Republicans and Democrats didn’t keep their hands off the system but are now looking at it as being the Boomers fault even as they watched their home equity collapse, ditto for their 401k’s and now the crazies on both the left and right want to privatize and destroy the long term obligations of Social Security and Medicare. It’s not like one leg of the three legged retirement stool was deliberately broken, they are going after stealing the whole stool.

  10. Posts like this are a clear indication that donations are down. Donate now, for Christ’s sake. Teachers are doing better than we are.

  11. This is peanuts compared to working for San Francisco. There you can get a lifetime annuity equal to 15% of your salary after only 5 years of working for the city. And you may not even have to contribute to your retirement to get it. Of course, SF is also broke.

  12. Ditto..

    “It makes sense not just bring pay scales into line with the private sector but the conposition of compensation.”

  13. At the risk of flaming, I am a fed bureaucrat, and the whining of feds who missed out on CSRS is legendary. When you occasionally find a CSRS employee, they are asked every day “Why haven’t you retired?” they typically get 85% of their “high 3”–the average of their best 3 years of income as a fed.

    FERS isn’t as good, but as you pointed out, we get a 401K equivalent AND a pension–yeah, that’s better than you taxpayers in most cases.

    I made my deal with the devil, and I’m happy with it. However, I do realize that ultimately, the taxpayers are the bosses, and if they want to alter the deal, they can. Most feds don’t see it that way.

    1. Stop stealing my money, dickhead!

    2. CSRS max is 80% (not 85%) and that occurs only after 41 years, 11 months creditable service. The high-3 thing? Applies to both FERS and CSRS currently.

      I’ve always wondered why the workers of the world put up with employers chintzing out on pensions and accepting as normal the crappy things that pass as pensions in the private sector (for the non-management types at least). Same with pay issue.

      Kind of weird cultural dissonance – belief that government should be run like a business except when it comes to pay or benefits, then gov should be like a 3rd tier employer. Then people complain about the competency of teachers, feds etc, not realizing that you are getting what you pay for.

  14. Can someone explain to me what part of this argument you’re having a hard time understanding?

    The federal government contracts out the vast majority of their low-educated, low-skilled, and consequently, low paid jobs. If you factor these types of jobs out of the private sector total, the disparity in pay wouldn’t exist. Your essentially comparing apples to oranges. Are you actually surprised that highly educated professionals have better retirement plans than janitors?

    1. The link in the article, “83 percent of comparable occupations” does not support your assessment.

  15. The best comparison I’ve heard lately is that many in the private sector took a hit to their 401k when the market tanked. The same public pension funds took that hit, but the employees don’t expect to suffer from it. Completely unfair.

    http://www.intellectualtakeout…..ion-crisis

    1. The PERA systems nationally took the hit but were not invested in the 1985 created “securitized instruments” that wall street wanted everyone to invest in. You ought to be really scared that wall street has some 600 trillion dollars of those bets on bets floating worldwide. I for one am happy that my pension plan was not ripped off in the past by a governor that thought about using it as a piggy bank for his use.

  16. Instead of griping (ad naseum), why aren’t any of you grousing sad sacks trying to *get* one of those federal jobs that are supposedly so lucrative?

  17. Government pension plans, including local, state, and federal, need to be examined, and in many cases, greatly reduced. As someone who works daily with federal employees, I see how well they have it. Job security, vacation time, pay, reasonable workweeks, and retirement programs are all benefits that far exceed those of their non-government-worker peers. It is unfair to continue to ask those of us who have lost much (either through massive 401k looses due to the market, and/or reductions/losses in pensions, or financial pain due to inflation) to continue to fund their unreasonable retirement plans. Some politician promised these great benefits in order to get themselves elected. They were not given because accountants evaluated them and decided they were fair, reasonable, and sustainable. They are not, and many of them need to be greatly reduced. It is unfair to continue to have the taxpayer support them. Write and tell your representative how you feel.

    BTW, the federal retiree gets a 5% 401k contribution, fantastic medical plan, and most importantly, a very generous life long annuity (with increases proportional to inflation) that leaves the retiree immune to all worries of an under performing market. The last item alone trumps most all plans anyone in the private sector will ever see.

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