No ‘sweetheart deal’ for federal employees, retirees

In recent weeks, there has been much said and written about New Jersey State pensions and the seeming abuse of same. The apparent abuse comes from the system itself, which allows state and local employees to hold more than one job, subsequently using the pay from all jobs to be calculated in the pension computation. I would guess there are others of which I and the rest of the public are not aware.

There is a basic calculation in which the last three years of earnings — generally the highest of one’s career — are used to compute the pension. Be it as it may, it is not the fault of the individual, but the system itself which has been created by our legislators. So don’t berate the individual employee. You should berate those responsible for creating a system which allows these extremes.

The main point of this letter is, however, to make the public more aware of federal pensions and how they may or may not relate to the above, and to clarify the general impression that all federal employees also receive overly generous pensions.

The first vital point is that members of Congress, the House and Senate do have a pension only somewhat related to that of the general employee. Members of Congress do not have to work(?) a lifetime in Congress in order to receive a very generous pension.

For the average regular employee, however — police, fire and certain others excepted — the pension is calculated on the average of the high three contiguous years of earnings. There are two basic pension systems now in effect — the Civil Service Retirement System (CSRS) and the relatively new Federal Employees Retirement System (FERS). To receive at least a respectable pension, one should be employed at least 30 years.

Critics will say that no matter what, the pension is overly generous. But extremely important — and not considered by these critics — is the fact that federal jobs relating to equivalent private-sector jobs pay considerably less, so over the years, the federal employee has not earned as much as a private-sector employee. As a result, the supposed high pension is based on a lower amount of pay.

CSRS employees are not covered under Social Security. And if one has had a side job, the Social Security benefit is calculated at a lower-than-normal rate — called the Windfall Elimination Provision (WEP) — because of the receipt of the CSRS pension. One wonders where the windfall is, especially when having worked a second job perhaps to make ends meet.

Private-sector employees receive whatever company pension and full Social Security. Their Social Security is not affected by their private pension. No windfall here.

A CSRS pension is for the individual employee only. A spouse has no life entitlement. The employee contributes 7 percent of after-tax dollars. Under Social Security, a spouse is entitled to half the wage earner’s Social Security benefit at age 65, and a widow(er)’s benefit if this event occurs. A CSRS employee, if he/she wishes to provide for a widow(er)’s benefit, must opt for a nearly 10 percent reduction in pension.

There is an optional thrift saving plan (TSP) for CSRS employees who can contribute up to 5 percent of pay, no matching. This works like a private sector 401k plan, and is subject to investment risk.

New employees are no longer covered under CSRS.

Under the FERS system, the basic pension is much smaller, but the contribution is also 7 percent of pre-tax dollars, and there is also coverage under Social Security, paid for, of course, separately. And finally, there is an optional TSP allowing for a total of up to 15 percent of pay to be contributed, which includes some minimal government matching. Thus, federal employees pay for their pension. It is not a gift. And only employment at one job at a time is allowed.

And, remember the congressional calculation is different, much more generous, for they have taken care of their own.

Medicare and supplemental coverage is another big issue. All federal employees are now covered for Medicare, which is paid, like everyone else’s, via the Medicare tax. Retirees must pay for part B Medicare (medical coverage) if they so choose, just as everyone else.

Critics complain about the fantastic medical coverage of federal employees. Yes, generally the various plans under the Federal Employees Health Benefits (FEHB) program are very good. For employees, no plan is free, and they pay a considerable percentage of the premiums. But consider this — when an employee retires, has and pays part B Medicare like everyone else, and if he/she continues FEHB coverage into retirement as a supplement to Medicare, there is no reduction in premium. Retirees pay the same as employees.

Therefore, do not think federal employees and retirees are getting a sweetheart deal. Whatever they get through entitlement, they have paid their share based on one job.

Eugene DiSanto

Middletown