This morning I testified at a House Oversight Committee hearing on federal employee retirement benefits, which are ripe for reform. My approach was to compare the benefits that at typical federal worker would receive at retirement versus what a private sector worker with the same salary might expect to receive. Federal employees are eligible for Social Security benefits, the defined contribution Thrift Savings Plan (TSP), and the defined benefit Federal Employee Retirement System (FERS).
The TSP is a good deal because the employer match -- up to 5 percent of pay -- is better than what about 80 percent of private sector workers receive. And on top of that, FERS provides a defined benefit for which federal employees contribute only 0.8 percent of pay, which is significantly lower than the typical state and local pension. The best of both worlds, so to speak.
And it pays off in higher benefits. At retirement, I found that a typical federal employee with 28 years of service would receive benefits roughly double those of a similar private sector worker. For a full-career federal employee -- yes, public sector unions, 28 years isn't really a full career -- federal benefits are even more generous. But the typical citizen really has no idea, and public employee aren't exactly in a hurry to fill them in.
And it pays off in higher benefits. At retirement, I found that a typical federal employee with 28 years of service would receive benefits roughly double those of a similar private sector worker. For a full-career federal employee -- yes, public sector unions, 28 years isn't really a full career -- federal benefits are even more generous. But the typical citizen really has no idea, and public employee aren't exactly in a hurry to fill them in.
Just keep in mind that, along with taxpayers, short-tenured federal workers who don't vest in the pension plan (or even for the TSP match, if they leave quickly enough) are funding the benefits of long-tenured workers. So a fix that merely causes all workers to pay more into the DB portion of the benefit exacerbates a very bad feature of the plan for short-tenured workers.
A full-scale reform that phased out the DB component would be much fairer to those workers who do not vest in the pension plan, or vest with a very low benefit relative to their amount of service.