How Much Will New Feds Pay for Retirement?

We all know new feds (i.e., hired on/after January 1 of this year) must pay more for their retirement annuities.  Specifically, 2.3% more.  Well, 2.3% is not much, is it?  To get a better handle on the magnitude of this change, let’s compare the actual dollars paid out by two employees.  One was hired in December of 2012, just before the change became effective, while the other started in January of 2013, right after the new rate became the norm, as it were.

Both employees retire 30 years later, and both have identical total salaries over the years, say $1.5 million.  Now, let’s apply the applicable percentages to determine how much they paid into the retirement fund over the years:

Old FERS – 0.8% FERS-Revised Annuity Employees 3.1%
$12,000 $46,500

That’s right.  For the same benefit, the new guy pays $34,500 more, almost quadruple the payment by the old FERS person.

Actuaries set up the “old” FERS retirement plan.  They created a structured, nuanced program that was balanced, long term, as to revenue vs. payouts.  It was, and still is, sound, business-like, and admirable.

Then our current policy makers came along and saw where they could “save” lots of money by arbitrarily having employees pay more into the fund, meaning their employers paid less.  Here is my question: why have we not heard from the actuaries who saw their hard work hopelessly and unfairly distorted?  Why has no reporter conducted an extensive interview with a knowledgeable actuary exposing this blatant money grab?

Clearly, feds must live with this, and they will, but they should at least get full credit for the substantial “contribution” they are making to our nation’s fiscal health!

Note:  employees hired this year can still be covered under the old FERS if they have at least 5 years prior (before 2013) FERS service, including military which can be “bought back” for retirement credit.

The opinions expressed above are those of the author, and have not been endorsed by FedSmith.com.

Federal benefits calculations are available at my web site, fedbens.us.

© 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.

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