While extending the payroll tax cut through the end of last year, members of
Congress last fall took what many feel was a long overdue whack at the cost of
their retirement plan. They bumped up the rate at which federal employees
contribute to their pension plan, saving an estimated $15 billion over the next
They also made sure that none of the increase
applied to themselves. Anyone in service before the law went into effect would
pay into the pension plan at the old rate.
For all the talk you hear from Capitol Hill about running government more
like a business, Congress has a retirement plan that would make any Fortune 500
executive blush. Members can retire younger, having contributed fewer of their
own dollars, than almost any worker in the country - even more than the generous
terms other federal workers get.
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At a time when traditional pensions are disappearing and many
workers are struggling to save for retirement, the Federal Employees' Retirement
System (FERS), an old-school defined benefit pension program, pays 215 former
congressmen and women an average of $39,576, for an average of 16 years of
service, according to a recent Congressional Research Service report
That's about what the average private-sector worker makes in retirement from
all sources after a lifetime of work, according to the Employees Benefits
Research Institute. The average income that worker gets from a pension is about
$8,800 - if they have one. In 2010, fewer than 15 percent of private sector
employees were enrolled in a defined-benefit pension.
"It's not keeping pace with what's happening in the private sector," said
Veronique de Rugy, a senior researcher with George Mason University's Mercatus
Center. "It's not sustainable."
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It's inaccurate, in fact, to refer a single retirement plan, since any
senator or representative elected after 1986 has access to three: Social
Security, a 401(k) program that matches 5 percent of their contributions up to
$17,500, and FERS, which as the name implies covers anyone paid from the federal
FERS alone is a plan any U.S. worker would envy. As Jim Kessler, co-founder
of the think tank Third Way and a former congressional aide, said, "It's not
wrong to have three plans, but the matching is one-to-one for two of them and
the other [FERS] is one-to-14."
As a result, all federal employees get a return on their FERS contributions
at a rate that's almost double what other workers do. (See chart.) But thanks to
a faster accrual rate granted to elected employees-how fast the value of their
benefits pile up-members of Congress even get a higher percentage payout on FERS
for the same time served than other federal workers do.
According to calculations by Pete Sepp, executive vice president of the
National Taxpayers Union, who has been tracking congressional benefits for
decades, an executive branch employee with 10 years of service and who is
retiring at age 62 this year would begin his pension at roughly $15,600. But a
member of Congress of identical age, salary and service would begin at
approximately $26,600, reflecting his higher contribution. But for his extra
$11,000 in the first year's benefit, the lawmaker will have contributed only
$8,350 more to the plan.
Defenders of the system point out that elected
politicians have less job security than appointees like our executive branch
workers. Sepp doesn't buy it. "Not only do you get a lot more in benefits for
the extra you pay," he said, "but how many Cabinet secretaries stay in
government for even eight years?"
Some critics say congressional retirement plans are not only too numerous and
too generous, but the wrong kind. One of them is Republican Rep. Mike Coffman,
who has put forward a bill with a fellow Coloradan, Democrat Jared Polis, that
would end FERS.
"It makes no sense for Congress to continue to reward itself using taxpayer
dollars, with a defined benefit plan when ... much of the country has moved to a
defined contribution plan like a 401K," Coffman said in a statement earlier this
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But as Washington is consumed with the sequester,
the chances that Coffman and Polis' bill, or the $25 million we spend to support
our congressional retirees, will get much notice. More pundits have teed off on
the fact that our senators and representatives-the very people charged with
averting the automatic cuts to the federal budget-are among the few federal
employees who won't be touched by them.
Congress didn't enjoy plush pensions until 1946, when it was thought that a
gold-plated plan would induce members to cede their seats to young men who had
been galvanized by the war. But if the current deal is no longer gold-plated,
said Sepp, "it's silver-plated, and it hasn't been attractive enough to get them
rotated out of office."