Federal Employees Contribute Less Than 1 Percent of Salaries Toward Their Pensions — Taxpayers Pay 12 Percent; This Means That Bureaucrats Can Retire in Their 50s with Full Benefits While the Majority Work Until They Die to Afford Them That Luxury

The House-passed version of the fiscal 2012 budget resolution included a recommendation that would require federal employees to pay for half the defined benefit they receive with their pensions at retirement. Most employees currently contribute 0.8 percent of their salaries and agencies (taxpayers) pay 11.7 percent, with agencies' (taxpaypers') contribution set to increase to 11.9 percent in October.

Groups Urge Leaders to Reject Proposals Aimed at Federal Workforce

July 5, 2011

Government Executive - With less than a month to go before the government begins to default on its obligations, federal employee groups continue to urge congressional leaders and the White House to reject proposals targeting their pay and benefits as part of a deficit reduction deal.

A coalition of 25 groups sent letters to President Obama and House and Senate leaders July 1, criticizing a plan negotiators are considering that would require federal workers to contribute more of their salaries to their pension plans, calling the proposed increase a "payroll tax." Federal employee advocates argue such an increase in worker contributions could exceed 5 percent of employees' income.

"Federal civil servants are already subject to a two-year pay freeze, despite the fact the nation's debt crisis did not arise out of exorbitant federal civil service pay or benefits," the letters stated.

The Federal-Postal Coalition is made up of organizations including the American Federation of State, County and Municipal Employees, the National Association of Letter Carriers, and the Senior Executives Association. The group sent a similar letter in June to Vice President Biden, who is leading the debt ceiling negotiations.

Bruce Moyer, chairman of the Federal-Postal Coalition, said in an email that the group has not received a response to its July 1 letter.

The future of government employees' contributions to the Federal Employees Retirement System is uncertain. In addition to discussions to increase workers' share as part of debt ceiling negotiations, the House-passed version of the fiscal 2012 budget resolution included a recommendation that would require federal employees to pay for half the defined benefit they receive with their pensions at retirement. Most employees currently contribute 0.8 percent of their salaries and agencies pay 11.7 percent, with agencies' contribution set to increase to 11.9 percent in October.

In June, the U.S. Postal Service halted employer contributions to the FERS-defined benefit plan, which the agency estimates will free up $800 million in cash this fiscal year.

The Treasury Department in May suspended investments into federal employees' pensions, when the government officially hit its debt ceiling of $14.3 trillion. Once the debt issue is resolved, the Treasury by law will be required to restore federal pensions and the Thrift Savings Plan's stable government securities (G) fund to their full balance, along with any interest lost during the suspension. The government expects to default on its obligations on Aug. 2, unless negotiators can come to an agreement.

Current and former lawmakers have jumped in on the pension debate. Sen. Barbara Mikulski, D-Md., last month urged Treasury Secretary Timothy Geithner to protect federal pensions during budget negotiations. She also criticized the idea that government workers should contribute more to their retirement plans in an effort to cut spending. Sens. Richard Burr, R-N.C., and Tom Coburn, R-Okla., have introduced legislation that would end the FERS defined benefit plan for new federal employees, including new members of Congress, starting in 2013.

Failure to raise the government's debt ceiling could lead to cuts in pay and benefits for federal civilian employees, military members and veterans, according to an analysis from the Bipartisan Policy Center. In a report published in June, the center found that unless the debt ceiling is raised, federal spending would be cut by 44 percent in August. Under several scenarios, Geithner could prioritize spending to include reductions in pay for government workers, the group said.

A February report from the Congressional Research Service, however, found that exceeding the debt ceiling carries less risk for federal workers than a government shutdown.

"Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would," CRS wrote, quoting a 1995 report from the Congressional Budget Office. "Employees would not be sent home and checks would continue to be issued."

Federal Employees Retirement System (FERS):

According to the Bureau of Economic Analysis for 2008, the average federal employee made $79,197 [the average private sector employee made $49,935]. The pension for the average employee can be calculated as follows:

$79,197 x 30 Years x 1% = $23,759
$79,197 x 40 Years x 1% = $31,678

Understanding the FERS Retirement

When we talk about your FERS Retirement, we're really talking about several different benefits. FERS (Federal Employees Retirement System) has three main components:

• Basic FERS Pension
• Social Security
• Thrift Savings Plan (TSP)

Your FERS pension and Social Security will be fixed dollar amounts. But the money you get from your TSP will depend on how much you contributed and how well you managed the money.

As a FERS, you have a chance to take a more active role in managing your own retirement than CSRS do. But, that means you need to stay up-to-date on your benefits.

Here are some important things you need to know about each part of your FERS retirement...

Reductions to Your FERS Pension

There are some choices you can make that will reduce the amount of your FERS pension:

• Retiring Before Age 62 with MRA+10
  If you retire before age 62 on an Early FERS Retirement (MRA+10), your pension will be reduced. Your FERS pension will be PERMANENTLY reduced by 5% for every year you are under age 62. Click here to see an example of this reduction and how it might affect you
• Survivor Benefits
  Your FERS Pension could also be reduced if you choose survivor benefits. Will my survivor still get my pension when I die?

Thrift Savings Plan for FERS

The Thrift Savings Plan (TSP) is a special account for Federal Employees. The TSP was created as part of the Federal Employees Retirement System in 1986. Most government employees (FERS and CSRS) are eligible for the TSP -- even those hired before it was created.

The TSP allows you to save pre-tax dollars in a special personal account. You can choose how to invest those dollars -- although your choices are limited.

With your FERS retirement pension and Social Security, you will receive fixed amounts. But with your TSP, the amount you receive depends on how much you put in and how well you managed the money.

Your TSP contributions are optional and separate from your FERS pension.

You may also be able to get your Federal Agency [taxpayers] to contribute money to your TSP.  Click here to learn more about the match the government gives FERS employees.

Social Security for FERS

Employees covered under the Federal Employee Retirement System (FERS) are typically eligible to receive Social Security benefits when they retire. Every pay period, the Federal Government takes out 6.2% of your basic pay to put towards Social Security. But just like your FERS pension, your Social Security benefit is not based on your contributions - it is based on other factors.

According to the U.S. Social Security Administration, the Social Security taxes you and other workers pay into the system are used to pay for Social Security benefits.

You pay Social Security taxes on your earnings up to a certain amount. That amount increases each year to keep pace with wages. In 2011, that amount is $106,800.

You pay Medicare taxes on all of your wages or net earnings from self-employment. These taxes are used for Medicare coverage.

Not self-employed	2011 Social Security tax	Medicare tax
You pay	4.2%*	1.45%
Your employer pays	6.2%	1.45%
If you are self-employed
You pay	10.4%	2.9%

Currently, U.S. citizens cannot collect Social Security benefits until age 62 (lawmakers are considering raising this age to 67 or 70). The maximum Social Security benefit at age 62 is $21,636 per individual.

* The employee contribution was temporary lowered from 6.2% to 4.2% on January 1, 2011.

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