The Practical Effects of the Proposed Pension Changes

By on January 26, 2012 in News, Retirement

It seems unlikely the Ross bill, proposed on Jan 25, will become law in its current form, but the interest is so strong, I believe a full comparison – now – is of interest.  Please bear in mind this is all tentative and hypothetical based on the bill as it’s currently proposed. 

CONDITIONS.  Two FERS employees with identical salary histories; each starts at $40,000 and over a 30-year career they each experience salary increases averaging 3.5% annually.  In their final year, each is paid $108,475.  The first person retires in December of 2012 and his contributions, annuity, and annuity supplement are calculated under current rules, while the other fellow, who started on/after Jan 1, 2013, pays the higher rate, receives the smaller percent, receives no supplement, and has his annuity calculated with a high-5 average salary instead of high-3.  Both employees are under age 62 at retirement.

Illustration, hypothetical:

  Total Salary Employee Contributions High 3/5 Average Percent Annuity Supplement Total
 $16,518 (0.8%)  $104,847  30.0 $31,454 $16,596 $48,050
 New $2,064,793  $82,592 (4.0%)  $101,382  21.0 $21,290 $0.0 $21,290


Summary.  It appears that with identical salary histories, the person retiring this year will receive more than double the income at one fifth the cost of a “secure annuity” retiree under the new rules.  Of course, when the two persons become 62, the supplement for the “old” retiree will stop, and the difference will be less (i.e., the old guy will have a 50% advantage).


  • Contribution rate for current employees is scheduled to increase 0.5% annually for 3 years beginning in 2013, with a final rate of 2.3%.  Also, current employees retiring after 12/31/12 will not receive a supplement.
  • Percent per year of service for old is 1.0; new = 0.7.
  • Social Security not included in the above.


CSRS not included in above, nor are CSRS special or FERS special.  Congress is omitted, too.

How many/which changes will actually come to pass?  Your guess is as good as mine.

My website – – has nine calculators that may be helpful.

© 2016 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.

135 Replies

Comments RSS

  1. Lbtorbert says:

    I have a novel idea. Don’t change the employees retirement calculation. Change the percent that Congress is alloted.

  2. Happy CSRS Retiree says:

    I disagree with your example. Why? Well, in December 1982 (30 years ago, correct?) there was no FERS, only CSRS Offset. In January 1987, FERS would then have become mandatory for them due to having less than 5 years covered service. Second, there is no way that a person would have been first hired at GS-13 Step 6 ($40,750 PA) on the 1982 salary schedule unless they were a congressional intern or such. Start your calculations again, please…

  3. Sstriker1 says:

    I am a Republican and I think this is outrageous the changes they want to make to the government employee. I was going to retire in 2014 and now it looks like 2013 for me. We have turned this country into takers and not givers. I hope Congress goes by the same changes.

  4. fedman says:

    Look, I’m a federal employee and do none of you understand the Federal government is broke and cannot afford to pay this much in retirement anymore.  Do you want to have a revolution and not have any retirement pay or even a job?  We must do some cutting.  Now I agree it does suck that we seem to be the target both Dems and Repubs like to bash nowadays and if they dont attack the entitlement programs to save money we will still have that same revolution.  It’s simple everybody, and I mean everybody needs to make a sacrifice to get the debt under control, medicare, welfare, militiary, rich, poor…..etc…..

    Just one man’s opinion.

    • The Master says:

      And yet the politicians come up with billions for themselves and their families. When people were hired, certain promises regarding reitement were made in writing. People planned accordingly. The political leaders should have as well. The reason the country is such dire finances isn’t because of federal employees. Putting tens of millions into poverty isn’t the answer, especially since the government already covers that and isn’t talking about reducing those programs.

  5. Hose3711 says:

    If I had a million dollars in my TSP, all this talk about reduceing our benifits would not matter. We would not need them, we would have all the money to retire on in our TSP. But we need to have more options so that we can get higher returns.

  6. Liana says:

    I canno use your calculators.  It says my version of Windows is incompatible?  I have Windows 7.  What’s up?

  7. Hose3711 says:

    This is why we need to have more tranfer options,as in 2 more, in our TSP. So that we can increase our rate of returns.

  8. nowhere close to retirement says:

    Why do voters elect people to run the government that are always demonstrating how much they hate it?  It’s like getting sick, then choosing a doctor that always talks about how bad medicine is.  WTF? 

  9. Concerned citizen says:

    There you go!!  I want them to leave the pensions alone!!  I am already retired under disability but the federal employees are going to start resenting the system they have poured their hearts and souls into!

  10. Marc515 says:

    In the future government employees will not have a defined pension, nor should they. Hey, pensions are nice, but like the private sector found out, thay are unsustainable. Besides that, why should the federal or state governments be in the pension business? What’s wrong with them offering a 401K plan like private industry?

    • The Master says:

      That’s not true. The FERS pension is sustainable. A couple of years ago, it had a surplus. Once the economy recovers, it will again. It has happened in the past the same way. When the economy is good, the FERS pension has a surplus, when the economy tanks, it runs a small loss. in the lomng term, it balances out. The reason pensions are viewed as not sustainable is that companies tend to underfund them. Just as the government did with the CSRS pension. The FERS pension is not a full pension and is not to retire on alone. In addition to that, we pay Social Security tax and have a TSP (it’s like a 401k). The real question is why does the Federal government garuntee pensions for the private sector with tax dollars?

  11. Raoj2001 says:

    I would much rather be broke with no benefits than support obama.  All you cry babies are falling into the same democratic trap of being dependant on government.  My neighbors and my friends have to plan for their own retirements, why should we be any different.  No where in the constitution is retirement and health care benefits guaranteed.

  12. Frustrated Fed says:

    The Annuity Supplement was added by Congress under FERS in 1986 to help “soften the blow” of doing away with CSRS; so now (26 years later) the current Congress can ignore the commitments of the ’86 legislators and pull the supplement before we get to retire?  “…just ain’t right”

  13. OldFed says:

    This bill just passed the committee, I assume next it will go to the full House for consideration.  Every Federal employee needs to contact your congressperson ASAP and let them know how you feel about the way they are trying to gut the Civil Service. These actions will cause people to retire in droves (those who can) and younger Feds to flee. That’s what the Republicans want, to put contractors into gov’t jobs  and have the govt pay them twice what Feds make, so they can reward their fatcat campaign contributors. Make no mistake, that’s what is happening here.