Sunday, May 15, 2011

Changing Federal Pensions

The Washington Post's Lori Montgomery reports that deficit reduction talks are considering changes in federal pensions, specifically requiring an increase in the employee contribution to the system. 

My memory is the Reagan administration pushed through a redo of the civil service pension system in the mid-80's.  Part of the idea was saving money, part was to make federal bureaucrats more able to change careers, part was just responding to the currents in the air (i.e, the general change from defined benefit to defined contribution retirement systems in the private sector).   I'm not aware of any followup studies to see there is more changing around  because the employee can take her TSP (aka gov. 401k) with her. I suspect that aspect was oversold.

 Her last four paragraphs:
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.
David John, a retirement expert at the Heritage Foundation, agreed that FERS “is far more responsible than most of the state and local pension plans.” But at a time when the federal government is spending drastically more than it takes in, he said, it is reasonable to ask whether taxpayers can afford it.
In the private sector, less than 20 percent of workers still have access to a traditional pension, John said. “With FERS, everyone does.”
I'm one of those CSRS retirees, living high off the hog. :-) In an ideal world, it'd be possible to reduce benefits to me in order to lessen the impact on others.  But in the real world, the only way to reduce benefits to those already receiving them is to change the COLA formula.  Hence Rep. Ryan's proposal to phase in his Medicare changes with those under 55.

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