The Federal Employees Retirement System (FERS) has been likened to a stool with three legs. Federal retirees in their golden years draw on Social Security, a monthly annuity and earnings from their 401(k)-style Thrift Savings Plans.
But a new bill introduced by a trio of Republican senators would lop off one of those legs, ending the defined benefit portion of FERS coverage for new federal employees hired within six months of the bill’s passage.
The sponsors of the bill — Sens. Richard Burr (R-N.C.), Tom Coburn (R-Okla.) and Saxby Chambliss (R-Ga.) — say the Public-Private Employee Retirement Parity Act would align federal retirement benefits more closely with those earned in the private sector.
“Right now, federal government workers receive far more generous retirement benefits than private sector employees,” Burr said in a statement. “The cost to taxpayers of these benefits is unsustainable and we simply cannot afford it. We cannot ask taxpayers to continue to foot the bill for public employee benefits that are far more generous than their own.”
Burr introduced a version of the bill in 2011. It garnered 12 co- sponsors, although it never made it out of committee.
Over the years, many private companies have done away with pension plans for their retirees. The average private-sector retirement plan includes a 401(k) with a 3 percent employer match — and no pension, the senators say.
Federal retirees, on the other hand, are guaranteed a monthly annuity and are eligible for a 5 percent match from the government on their TSP contributions.
The bill would also require the Obama administration to compile a report on the actuarial status of FERS each year. The most recent report from the Office of Personnel Management’s Civil Service Retirement and Disability Fund indicates FERS was underfunded by $20.1 billion for fiscal 2012, according to the bill’s sponsors.
The Congressional Budget Office analyzed the impact of much less drastic changes to the FERS system in a report released this week. CBO said requiring current federal employees to contribute 2.1 percent more of their salaries toward their pensions, as proposed by the Obama administration in its 2014 budget plan, would increase federal revenues by $19 billion over 10 years.