Tax Cut Triggers In-House Civil War

Has the proposed Social Security tax cut triggered a mini-civil war in your office?

Is there a workplace chill between older workers under the old Civil Service Retirement System who wouldn’t get any tax break, and their younger colleagues in the Federal Employees Retirement System who would benefit?

Most of the federal workforce is covered by the FERS plan. But roughly half a million long-time feds are in the older CSRS program. They pay the Medicare tax but do not contribute to Social Security.

As proposed by the President, people who pay into Social Security (which is most American workers) would have their payroll tax cut by 2 percentage points next year. The idea is that the temporary cut would put more money in people’s pockets and they would spend more and stimulate the economy.

The two percent “raise” is a big deal to lots of people. Congress will almost certainly approve a 2-year federal pay freeze proposed by the White House, although military personnel are in line for a 1.4 percent raise in January.


Federal health insurance premiums are going up an average of 7 percent next month. That will be especially tough for retirees who didn’t get a cost of living adjustment this year, and who won’t get a COLA in 2011.

We’ve been flooded with e-mails from CSRS employees (mostly wondering why they aren’t getting a tax break) and from FERS employees (mostly wondering why the CSRS types are complaining.) For example:

  • “Most of your complainers (in this retirement system class warfare) seem to be ignorant of the fact that there are no Social Security caches of funds or CSRS/FERS caches of funds. It is all just a paper trail funded now and in the future with Chinese borrowing. These trust funds are in the same shape; they will last as long as the government can borrow funds.” Gary in Arkansas
  • “As a CSRS employee I’m less disturbed about missing out on the 2% FICA cut as I am about the effect on the Social Security trust fund. Every few years isn’t there a big panic about the Trust Fund going broke in ‘x’ number of years? So I guess they figure they might as well hurry it along. Brilliant. Why not just eliminate the FICA altogether. That would give most folks more like a 6% paycheck increase, and then we could close down Social Security and save all that money. Sheesh!” Nick with Social Security
  • “ first look I thought here it goes again, putting the old 1, 2 to the Federal Employee. But upon my 2nd and 3rd look I see where the FERS employee may, just may I say, get one up on the CSRS employee. I can’t tell you how may times a CSRS employee retires and says to me, a FERS employee, how much better their retirement system is. And it is much better than FERS, a system that doesn’t count on Social Security or a 401K, better known as TSP, to help you get close, just close to what that CSRS employee gets.

    “The CSRS employee hasn’t paid into the Social Security system for all the years they have been employed. Now they want that 2% cut back. Well on one hand I feel for them but my pocketbook and food pantry say something else indeed!!

    “When they receive that 4% COLA raise at some point or even the 5.8% they received in 2009, FERS retirees received 1/2 of that pay increase….ONE HALF!!!! So Mike you think they would give us the other half COLA….I think not. Sometimes what goes around comes around and this my dear friend is one of those times.

    “I really do not like to go against my fellow Federal Worker, but this time my pocketbook is a bit light and I must do what I must do!!!!!! Thanks as always for keeping us lowly Federal Workers updated with the news of the HILL!!!! ” Craig in West BG Virginia

  • “BooHoo… I’m a FERS employee and would trade systems with any Fed. worker under CSRS. I’d love to pay no Social Security Tax, not have to worry about TSP performance, retire at 55, and get 80% of my salary when I do. –Are you kidding me? Maybe all the CSRS employees should just retire before Jan 1 anyway.” Rich O. of the IRS
  • ” Well Mike since you asked….

    “Those CSRS Folks who are ‘upset’ need to admit the reality that they don’t pay SS so they don’t get the reduction. THAT IS fair.

    “They can also take great comfort in going to the bank as they get a minimum 60 percent of their salary when they retire, for the same years of service their counterparts in FERS basically get 1 percent per year for. Pretty Nice! Haven’t heard CSRS folks crying about how unfair that is.

    “CSRS retirees have ALWAYS had it pretty good…if they’re not all retired yet, they will be soon enough, and they will REAP great benefits. They had the option of joining FERS years ago, but if they opted out to protect their 60 percent plus retirement checks, they can’t cry now over a 2 percent tax reduction in SS they don’t even pay. We’re ALL taking the freeze, but we don’t ALL get the good package they have to look forward to.

    “I had no choice of CSRS or FERS when I came in 6 mos. after FERS started, and I have paid SS for my entire career. When I get to go, I’ll have a whopping 36% of my salary for the same 36 years of service CSRS folks get far more. Oh yeah sure I have the TSP…but it isn’t the million dollars everyone SAID it would be if I invested the max I could (and have done) when it started…far less.

    “The CSRS employees, like ALL us Feds, should relax, take a DEEP breath, be grateful we have a job, stability/continuity, good health insurance, and a pension that no one ran off with or blew. We will all be fine when this crisis has passed.

    “Keeping it in perspective…. “ Deborah V.

  • “…It should not be an us vs them situation. Congress did this many years ago trying to put more money into SS so they could then take it and spend it elsewhere. The CSRS folks were lucky enough to start work before 1981 which makes us on the older side which is again a rub. Eventually, it will all be FERS and that is what congress wanted to begin with. But, CSRS employees/retirees also pay in other ways by not being eligible to draw on their spouse’s SS if it is more than their CSRS retirement. That can make a huge difference. I had an employee who worked for about 15 years and retired. Her retirement is all she had and it is a pittance. She cannot draw on her husband’s larger amount as she was a stay at home mom for years. If he dies, she will be below poverty level without their other investments. When the retirement plan first changed to FERS in the early 80’s, we were courted and pushed to convert to the new system from CSRS. Many did. The ones hired later had no choice. So the FERS folks can be mad at the CSRS folks but we are all in the situations we are in based on when we started work (and a few with choices made during a short window.)” Barbara, Retired and Happy
  • “Shame on you for stirring the pot! (Can I have some cheese with my whine, please?) Of course the 2% cut in Social Security tax is unfair to CSRS employees! To those in FERS, have you forgotten the matching contributions (up to 5%) that the Government makes to your retirement which CSRS employees do NOT get? Thirty or so years of matching contributions can mean hundreds of thousands of dollars! Of course the two retirement systems are unfair! They were designed that way! People seem to forget our history when their benefits are attacked. Excuse me for being born earlier than a FERS employee! I had no say in when I was born, neither did you! The CSRS system was the only system available to me, as the FERS system was the only system available to you. We are all privileged to have jobs during this time of financial crisis. Up to 20% of the country is out of a job, when you include the people who have given up on trying to get a job. That’s 1 in 5 people out of a job because of our politicians. I say again, shame on you, Mike! Instead of pitting CSRS against FERS, you should be rallying all of us, FERS and CSRS, to rail against all the pork that is being inserted into this ‘tax’ bill they are crafting in Washington. It was announced over the weekend that an unnamed Senator (rhymes with Barry Teed) added hundreds of pork projects to the bill to placate upset Democrats. That’s where our ire should be directed – not against each other, but at our selected politicians who write the legislation. They are the ones that caused this recession. They are the reason the TEA Party got started. THEY ARE THE ONES THAT DESIGNED OUR TWO RETIREMENT SYSTEMS. We should ALL be angry at them, not each other! ” Paul from FAA

Thoughts? Rants? Amens? Objections?

Nearly Useless Factoid
by Suzanne Kubota

Four out of five married people buy things they don’t tell their spouses about. You’re shocked, right? According to a survey by CESI Debt Solutions, men are slightly more likely than women overall to engage in what Money Magazine calls these “little green lies.” However, “43 percent of wives cop to buying clothing or accessories that they don’t tell their husbands about, making fashion easily the most common purchase that a spouse of one gender hides from the other.” And men? They’re most likely to not tell their wives how much they’ve spent on booze, which 21 percent of husbands have done.


Transit subsidy not dead yet
Other headlines from this morning’s Federal Newscast include: Closure statuses to change for 2011, DLA Troop Support honcho relieved of command, and NASA names new Chief Scientist.

Thrift Savings Plan update
Tom Trabucco of the Federal Retirement Thrift Investment Board discussed the latest statistics on returns and participation in your TSP funds.