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Retirement Packages: Congress vs. You

Mar. 18, 2013 11:19am Guest Post

[Editor’s note: The following is a cross post by Paul O'Donnell that originally appeared on CNBC.com]:

Make No Mistake About It, Congressional Retirement Packages Are Pretty Generous

Getty Images.

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 11 years.

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.

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.”

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 till.

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 year.

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.”

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©2013 CNBC LLC, Paul O’Donnell.

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Comments (22)

Gildersleeve
Posted on March 18, 2013 at 3:24pm
We can b*tch & moan all we want but not one damn thing will change. But economic collapse would make things interesting.

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pap pap
Posted on March 18, 2013 at 2:39pm
Corruption at it’s finest and most abhorant.

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thegreatcarnac
Posted on March 18, 2013 at 1:20pm
Congress is not ‘of’ the people anymore. First…..elections are rigged. If the presidential elections were rigged (and they were) then all elections are rigged and illegal. We don’t really know who can vote and who is foreign. We can’t even stop these morons from voting more than once. Once these people get to Congress they forget about the people and do what they are told are what the richest donor they have wants done. Therefore you have little demigods who pass tyrannical laws and exempt themselves from them. Rebel one day: for you have taxation without representation.

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turkey13
Posted on March 18, 2013 at 12:14pm
California is the place to be when you retire. WOW – $822,302 was paid to one state psychiatrist in 2011. They also had 11,000 prison guards who received more than $100,000 in 2011. and 900 prison guards who received more than $200,000 in 2011.

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YesLiberalsAreThatDumb
Posted on March 18, 2013 at 12:11pm
And when they can no longer support the insane payouts?

Simple, they will just RAID OUR RETIREMENT FUNDS! Yes, Nancy Pelosi has already said it, that our retirements would “more safe if congress controlled our investments…”

Kind of like letting the wolf guard the sheep… or the sheeple!

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- Cavallo
  Posted on March 18, 2013 at 12:45pm
  That’s why they want our guns.
  
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Cavallo
Posted on March 18, 2013 at 12:04pm
Just think.. soon they will be pulling a cyprus on us; seizing our savings and our retirements, just so they can keep theirs. We’re ruled by self entitled aristocrats. How about all personal wealth from government officials be seized to help pay the deficit? Think we’d have a balanced budget really quick?

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richauthor
Posted on March 18, 2013 at 12:02pm
I have a retirement pension based on an on-duty injury while serving as a police officer. The injury occurred when I was 34 years old. The partial disability pension is so small that it does not allow me to live a comfortable lifestyle at my current age of 73. Consequently, I am forced to work fulltime to stay just above the poverty level. I worked in my police job for twenty years before retiring, and during that time, I worked at second and third jobs to supplement my income for my family of five. I paid into social security for each of those other jobs, but because of my police disability pension, I am only allowed to receive 50% of my social security contributions, which accounts for approximately $727 per month in addition to my disability pension.

Although my elected Representatives and Senators are public servants, working for me, somehow I have gotten the shaft, while they are able to gain REGAL retirements for a small portion of time that they are in Congress. Just like the pay of our military, serving in hazardous conditions during deployments, it is a MERE PITTANCE of what the politicians receive.

It is long past time that the Congressional pay and retirement packages are proportional to what others receive.

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media-bias-steals-elections
Posted on March 18, 2013 at 11:59am
If the best and brightest were actually competing for these jobs, why are they paid anything at all? Not even members of Congress get paid when there is a run on the banks

That’s what happens when you stop representing the People, and do nothing when major players in the economic community are hording gold with obvious risks involved? George Soros wrote a book on this subject, I have it? He is a hero to some people?

“Soros on Soros, Staying ahead of the Curve”, endorsed by Henry Kissinger, Zbigniew Brzezinksi, Barton Biggs, and Paul Volcker? 1995? Before this book “The Alchemy of Finance, Opening the Soviet System, and Underwriting Democracy?

George Soros has a passion for international finance, and dedicated his life to off shore investment funds consolidated under the Quantum Group of Funds? No relation at all to the James Bond film Quantum of Solace?

There’s a whole chapter dedicated to the Open Society, lets see, the Theory in Action, invest part of your winnings in philantropy, get your fingers into Mexico and China if you can, by becoming a “stateless statesman”? George Soros got his “break through” in Europe, that’s what started his career? Was it a break through like Cypress?

Great Britain was the motherland of Democracy he says? No chapters on the US Constitution and a Republic, I wonder why? Because you can play on the loyalties to the British Crown, by God those English are good people?

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Patriot760
Posted on March 18, 2013 at 11:47am
No retirement benefits for any of them! That’s one way to stop 25-40 year terms in office! Stop the bribery, oh sorry, lobbying.

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- woodyee
  Posted on March 18, 2013 at 12:00pm
  Amen, brother! (or Sister!)
  
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SREGN
Posted on March 18, 2013 at 11:44am
If Al Quida came around to me with a fundraiser to off congress and that other imbecile I’d really have to stop and think about it. I mean really, who is the greatest threat to me and my progeny? AQ isn’t spending my kids into oblivion. AQ isn’t taking away my God-given and constitutional rights. AQ isn’t taking so much of my hard-earned money in taxes that I have to eat hamburger and giving it to lazy non-working parasites who are in front of me in the market with cartloads of steaks. The ones doing that are congress and that other imbecile. I’d truthfully consider contributing.

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- Devout Infidel
  Posted on March 18, 2013 at 11:57am
  Makes one wonder what would have been if flight 93 had made it’s original target. Not condoning this in anyway, but America would definately be under different leadership and on a different course from what it is today.
  
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cloudsofwar
Posted on March 18, 2013 at 11:41am
operation normal….. everything f ed up.

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beardedjesse
Posted on March 18, 2013 at 11:36am
Why shouldn’t they receive exactly what everyone else does in good faith like ObamaCare dictates for healthcare? The big push is for everyone to get the same/equal (I.E. Socialism/Communism), but its selective in nature when left up to WashingtonDC. They really just want the absolute power to select who owns what, who gets paid what & who gets treated as first class, second class, third class etc. Lets call a spade a spade. They ultimately want absolute control over everyone they consider to be “common folk.”

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willingtoupe
Posted on March 18, 2013 at 11:30am
TERM Limits for Congress! End JERRYMANDERING in the South!

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- Sgt_Rock
  Posted on March 18, 2013 at 12:36pm
  End gerrymandering everywhere!!…big money liberals bank rolled it in Colorado in 2004 and they took over both houses of the legislature and the governors office in what used to be a red state. Now with all the data mining and online polling it will only get worse. Google is going to be a big player in this, you watch. Redistricting is going to look like spastic puzzle making.
  
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- thegreatcarnac
  Posted on March 18, 2013 at 1:12pm
  Yes indeed….stop jerrymandering and discriminating against white people.
  
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Bonnieblue2A
Posted on March 18, 2013 at 11:28am
#SequesterThis

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Bonnieblue2A
Posted on March 18, 2013 at 11:27am
Most public sector employees and elected politicians alike run not for the salary but for the benefits, networking, and power.

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Snowleopard {gallery of cat folks}
Posted on March 18, 2013 at 11:25am
I have a very simple solution to Congress members ‘retirement packages’: GET RID OF THEM!

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- Simple Skeptic
  Posted on March 18, 2013 at 11:42am
  Amen
  
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