Federal Pensions Are a Sweetheart Deal That Needs to Be Soured
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.
Watch 3 Reasons Public Sector Employees Are Killing the Economy: