Federal Deficits and Your Federal Employee Retirement

By on February 21, 2013 in News, Retirement

Will the federal deficit impact your federal retirement?

In the past several weeks, some readers have asked variations of this question: “Is our federal retirement fully funded” or “Is the federal retirement system the same as Social Security where Treasury has to borrow more money to pay current benefits because the money in this fund has already been spent?”

Unfortunately, these are good questions. And, while the two topics may not seem related, in reality the deficit could have an impact on your future retirement. And, yes, the federal retirement program does have a large “unfunded liability.”

Uncle Sam is mired in debt. Spending by the federal government has skyrocketed and we are now spending more than one trillion dollars a year than the government receives in revenue. With all of the scary press devoted to the devastating impact on the public that will supposedly occur with sequestration, the actual cuts to the federal budget would be a relatively small amount—a 5% cut for domestic agencies and a 7% cut for the military. The sequestration would cut about $85 billion out of a federal budget that is about $3.6 trillion.  In other words, the $85 billion in savings is about 2.3% of total spending. Federal agencies received an average increase in their budgets of 17% in the previous five years—not counting a $276 billion stimulus bonus.

The Unfunded Liability of Federal Retirement

What does this have to do with federal retirement payments?

Politicians are looking for a lot more money to fund the massive federal deficit. Many of our leaders do not want to cut current spending. Unfortunately, the real federal deficit is much worse that the often reported $16 trillion. Despite the current agony about the deficit and federal spending, the looming deficits for Medicare, Social Security and other federal social programs, and some 10,000 people turning 65 each day with the aging “baby boomers” reaching retirement age, the more serious federal spending crisis has not yet hit home—despite the historically low interest rates currently being paid by the government to borrow more money.

The Civil Service Retirement and Disability Fund is broke.

Because CSRS retirement benefits have never been fully funded by employer and employee contributions, the Civil Service Retirement and Disability Fund (CSRDF) has an unfunded liability. According to a recent Congressional report, the unfunded liability was $622.3 billion in fiscal y ear 2010. According to actuarial estimates, the unfunded liability of the CSRDF will continue to rise until about 2023, when it will peak at $684.8 billion.

In reality, it appears the actual deficit for the fund is higher. The unfunded liability of the federal government’s pension systems grew in fiscal 2011 to $761.5 billion dollars — an increase of $139 billion from its fiscal 2010 deficit according to a new estimate reported by the Office of Personnel Management (OPM).

As one reader asked: “What is an unfunded liability.” Here is a definition from a financial dictionary:

“Describing any liability or other expense that does not have savings or investments set aside to pay it. That is, the party responsible for paying an unfunded liability pays for it out of current income or by borrowing. The risk of an unfunded liability is that a payee may not receive that which he/she is entitled to if the payer goes through a difficult financial period. It also increases the payer’s current liabilities.”

According to a recent Congressional report, here is how your federal employee retirement is different from private companies that offer a defined benefit plan: ”

“The assets in private-sector pension funds represent a ‘store of wealth’ that firms can use to meet pension obligations as they come due. The CSRDF, however, is not a store of wealth for the federal government. The fund is required by law to invest exclusively in U.S. Treasury bonds. These bonds represent budget authority, which is the legal basis for the Treasury to disburse funds. When the CSRDF redeems the Treasury bonds that it holds, the Treasury must raise an equivalent amount of cash by collecting taxes or borrowing from the public.”

In other words, in order to distribute federal retirement payments, the Treasury Department has to pay the money from current revenue or borrow more money.

As Congress looks for ways to bring in more revenue any way that it can, federal employees will continue to feel the financial pinch. As readers know, there has been a pay freeze in effect since 2011. A bill that has passed in the House of Representatives would extend this pay freeze. New federal employees are now paying more toward their future retirement.

Last year, a bill was introduced that would end the defined benefit pension portion of the Federal Employee Retirement System (FERS) for new federal government hires starting in 2013. The bill would have left the Thrift Savings Plan in place with the current match (up to 5%) for both current and future federal workers.  The bill would also apply to Members of Congress. Senators Tom Coburn (R-OK) and Richard Burr (R-NC) intend to introduce the same or a similar bill in the current Congress.

It is far from certain that such a bill will pass. Keep in mind though that the Obama administration has also proposed a 1.2 percent increase in federal employee contributions to their future retirement. The stated reason is because  the “defined benefit” pensions that many government workers receive are becoming “increasingly rare,” and are available to about 21 percent of private sector employees. Moreover, private sector employees contribute nearly 50 percent of their retirement savings, while government employees pay about 33 percent.

With the pressure continuing to rise as the federal deficit continues to set new records, federal employee pay and and benefits are likely to continue to be under increasing scrutiny. It is unlikely that the federal annuity will be eliminated but in negotiations between Congress and the administration, anything can happen. In the absence of the political will or desire to make significant changes to the large federal entitlement programs that now are 62 percent of the federal budget, anything can happen and the size of the federal workforce is small compared to the number of people who receive Social Security or Medicare.

Regardless of your personal political philosophy, readers will want to track proposed changes to federal benefits. While the federal benefits program has traditionally been consistent and changes have usually been positive, we are in a new political era because of the massive deficits and the shifting political philosophy among many elected officials about the amount of spending that is acceptable by the federal government. It would be unrealistic to assume there will not be changes to federal pay and benefits in view of the large deficits. The questions are  what will the changes be and who will be impacted the most.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.


About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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  1. Comrade1917 says:

    “In the absence of the gold standard, there is no way to protect
    savings from confiscation through inflation. … This is the shabby
    secret of the welfare statists’ tirades against gold. Deficit spending
    is simply a scheme for the confiscation of wealth. Gold stands in the
    way of this insidious process. It stands as a protector of property
    rights. If one grasps this, one has no difficulty in understanding the
    statists’ antagonism toward the gold standard.” – Alan Greenspan

  2. downhill we fall again says:

    with gold in fort knox all gone-they now want to rob from all of us
    after they rob from us it is on to Les Misasrables part 2….where even the military is the same as vietnam heros were treated 

  3. Gabe Bruno says:

       So in other words, we pay for all the record deficits caused by the wars we got mired in, Wall St. greed and the major bank’s (too big to fail) world class financial sleight of hand and their executive parachutes; all funded by American taxpayers, whether federal employees or not. Keep an eye on how those of us who pay the bills are manipulated against one another.

  4. Carol Schmidlin says:

    Really good article!

  5. whitelight56 says:

    It’s an open question if Federal employees under 50 will actually get FERS benefits. What do you think, will the Govt default on these programs?

  6. Karen_in_KC says:

    After reading all these comments, I have not
    seen anyone say anything about what has been happening in this country for the
    past at least 30 years.  While private corporations are making
    record-breaking profits, the rest of the population has seen union busting, jobs
    going overseas for slave wages, lowering of wages in this country, higher
    product and food prices, higher gas and oil prices, prices on EVERYTHING
    GOING UP!   While private AND Federal employees, CSRS and FERS and SS
    recipients are being robbed of funds that they worked for in good faith, and the public and private working force has been losing retirement benefits,  rich people
    and rich corporations (including our politicians) are sitting on billions of
    dollars and NOT HIRING, are making money hand over fist because of their low
    tax on capital gains, are being protected by politicians from paying a fair
    share of taxes (tax loop holes) and are systematically becoming even richer.
     Is it no wonder our politicians are STILL stabbing us in the back?
     Only the coming elections will give us a voice in all this madness!
     You can re-elect these same politicians who are protecting the rich from
    paying a little more in taxes by closing tax loopholes and trying to cut every
    dime from our pockets while they line their own, or you can vote to support
    those politicians who are trying to get the revenue needed to correct this mess
    from someone other than the middle class and the poor.  WE are our own
    worst enemy when we stick our heads in the sand and pay no attention to what
    our politicians are doing DAILY all across this country!   I was one of
    those people until I recently retired and decided to find out just what really
    was going on.  Boy was it an eye-opener.  I will NEVER again neglect
    to pay attention!  We MUST remain vigilant to what they are doing EVERY
    DAY!  If we ignore it until our country is in this kind of mess, we have
    no one to blame but ourselves.

    • wombat1951 says:

      If this was not a “cut and paste” job directly out of the Peoples World Daily, it could have been.

      • Karen_in_KC says:

        It wasn’t! I’ve never even seen ‘Peoples World Daily’. I wrote it myself because I find myself to blame as much as anyone because I too stuck my head in the sand for years and years! And every bit of it is true.  Watch C-Span to see just what the House and Senate are actually doing, if they ever start work again!  Don’t just listen to the news stations.  See for yourself!

  7. bopeep2 says:

    It is not true that Civil Service retirement has never been fully funded.  There used to be a separate fund into which we all contributed.  The fund was large enough to cover all retireees, partly because civil servants often died within two years of retiring.  Then Congress appropriated the entire fund into the General Fund (one year in the 80s, I believe).  So now we are at the mercy of the government, same as Social Security recipients.  Another fact is that the private workforce used to contribute to Social Security less than half what Federal Civil Servants contributed to the CS Retirement Fund.  We have traditionally paid more and we got robbed!  

    • wombat1951 says:

      You are wrong.   All of the money anyone ever contributed went into the fund the article talked about.   Except it didn’t.  It was spent and replaced with those special non-marketable bonds, or IOUs.
      Would love for you to provide proof with a couple sources for you claim about what the Democrat Congress did in 1980s to “appropriate” the fund into the “general fund”.   Pretty sure that never happened.
      You are correct, however, that Federal employees have been “robbed” :)   Your contributions were used by the government to pay for government, and were NOT put into an actual account for future use.   Just like SS since it’s inception.

  8. pbcrabshaw says:

    There is more to the story than Ralph mentions. The CSRDF was never meant to be pre funded like a private entity pension. Because employers cannot be certain that their revenues in future years will be sufficient to pay the pension benefits they owe to retired workers, ERISA requires companies to pre-fund defined benefit pension obligations.  When the Civil Service Retirement System was established in 1920, it was not pre-funded Because the federal government is not likely to go out of business.Further excerpts from cited report:Actuarial estimates indicate that the unfunded liability of the. CSRS does not pose a threat to the solvency of the trust fund. In its annual report, OPM has stated. that “the total assets of the CSRDF, including both CSRS and FERS, continue to grow throughout. the term of the projection, and ultimately reach a level of over 4.7 times payroll, or nearly 20. times the level of annual benefit outlays” by 2085. Unlike the Social Security trust fund, there is.
    no point over the next 70 years at which the assets of the Civil Service Retirement and Disability.
    Fund are projected to run out.

    The CSRDF held a balance of $797.5 billion at the end of FY2011. (See
    Ta bl e 1.) Obligations from the fund totaled $70.7 billion in 2011,

    The estimates presented in Ta b l e 2 show the income to the CSRDF rising over the projection.
    period from $95.2 billion in 2010 to $155.5 billion in 2025 and to about $1.2 trillion in 2085. 10
    The total expenses of the fund are projected to rise more slowly, increasing from $69.3 billion in.
    2010 to $116.2 billion in 2025 and to $669.7 billion in 2085. Consequently, the assets held by the.
    CSRDF also are projected to increase steadily from $784.6 billion in 2010 to about $1.3 trillion in.
    2025 and to $13.9 trillion in 2085.

    Federal Employees’ Retirement System:Budget and Trust Fund Issues.
    Katelin P. Isaacs Analyst in Income Security.
    January 10, 2013 http://www.fas.org/sgp/crs/mis….

    • HRGuy71 says:

      Your note is very positive but ignores reality.

      Keep in mind that while “The CSRDF held a balance of $797.5 billion at the end of FY2011” there isn’t any actual money there. And, while the assets are expected to eventually increase “According to actuarial estimates, the unfunded liability of the CSRDF will continue to rise until about 2023, when it will peak at $684.8 billion.” The latter quote is from a recent OPM report. When the CSRS was established, no money had to be borrowed to make the payments. There was more money coming in than was going out.  That has not been the case for a few years now so the “unfunded liability” will continue to grow for a few more years.

      We can refer to the “assets” until we are blue in the face if it makes us feel better to do so. It is like the Social Security system. There isn’t any money in the fund. The assets are just an IOU from the government.For each dollar spent by the retirement, the Treasury has to take money out of current tax receipts or we have to borrow more money to pay the “unfunded liability” of the federal retirement payments because there isn’t any money there to actually pay out to recipients.

      That, it seems to me, is the point of the article. citing the large “assets” held by the CSDRF is not relevant because it  requires borrowing more money as a result of the “unfunded liability.” Any way you look at it, our government is completely broke. If it were a private company, it would be in bankruptcy. The only reason it is still up and running is that the government is printing huge amounts of money each month and hoping the resulting inflation will not awaken the general voting public that we are deeper in debt than Greece.

      • RETVET03 says:

        There isn’t any “actual money” in my savings account either.  If I “borrow” from it with the intent to replace it from future income, it’s an “intra-me” debt.  When I pay it back,  I may have to make adjustments to my discretionary spending or increase my income, such as working another job.   But if I didn’t pay it back, or I missed a payment, it would hardly mean I’m bankrupt.  

        That’s why most of these government “funds” are kept in “special” treasuries; they wouldn’t dare use the regular t-bills that everyone else buys because defaulting on them would cause major problems for our credit rating, while defaulting on special intra-governmental debt would be largely viewed as an internal matter.  In the end, it’s what the taxpayers are willing to bear.

        Same deal for “unfunded liabilities”.  Kids, college, houses, and cars are all personal unfunded liabilities.  If you want to consider all those debt, then most people are easily 500K – 1M in “debt”.  The fact is, nobody is collecting a check from you for 250K as you’re standing over your new baby in the maternity ward.  But you will pay that over the next 18 years. Same for the 200K house that you’ll pay 385K for over the next 30 years.

  9. Customsman says:

    I contributed 7.5% of my salary for more than 32 years towards my federal pension.  How is this considered an “unfunded liabiltity”, when billions of dollars that we never saw were deducted from our salaries to help fund our own pensions?

    • wombat1951 says:

      Becasue your money was NEVER actually put away — it was taken and spent just like all excess SS revenues, and instead was replaced by those special “bonds” that are nothing more than IOUs.   Look up the term “inter-governmental debt” and learn about how the government has been deceiving the public for decades about the true nature of the SS “trust fund” and the CSRS and other pension “funds”.

      • RETVET03 says:

        Yep and the taxpayers, who spent this money, are on the hook for it.  Just thought you’d like to know.

        • wombat1951 says:

          But you must understand this simple fact of life….if they can’t pay for it because of all of the other debt being serviced and all the other spending being done with borrowed money, it WILL get to the point where the taxpayers just CAN’T pay it!   Whether they are on the hook for it or not………..

          • RETVET03 says:

            They can pay it.  With the amount of revenue collected or the amount that can be collected, it can be be paid back.  The question is how that will be done.  Reduction of the benefit levels would be a favored action of some, esp. those who aren’t interested in paying back the money they owe.  Changing the priorities of what we spend on is another option.  I do recall some people really pushing a bankruptcy bill that was to designed to make it more difficult to discharge debts and keep more people accountable for paying their debts.  Guess the chickens have come home to roost for those fellas.  Make no mistake about it:  people put their money in Social Security and pension plans and that money was borrowed by Congress in the name of the taxpayer, which makes the taxpayer responsible for paying back that debt.

          • wombat1951 says:

            RETVET03 — They CAN NOT pay it if there is no money :)   The amount of revenue currently being collected is less than 60% of what is currently being spent by the Feds.   Please let that simple fact sink in.
            You do, however, hit on the key to any solution to the problem — prioritization of spending.   Absolutely!   However — currently everything being spent is tied for priority #1!!!   Nobody is government is willing or eager to actually prioritize spending, because they know full well that doing so will instantly expose a lot of spending to the knife.
            And for the umpteenth time — the fraud that has been perpetrated on everyone with SS and Federal pensions is the LIE that any money ever got “put away” for the future.  By design and from the beginning, ALL excess revenues in these programs not needed to pay current benefits was ALWAYS provided to Treasury for spending and replaced with those non-marketable, no instrinsic value, IOUs.    You can place your hopes and desires in the line that taxpayers are responsible to make good on those IOUs when they are needed for you — but if the National Debt is twice or thrice what it is now, and revenue needed to service that debt soars; and if the Feds continue to increase spending without regard to the consequences; it will literally be impossible to keep all of the promises to SS, Medicare, and Federal pension recipients.  

          • youcantstandthetruth says:

            Ridiculous! You said; “the amount of revenue currently being collected is less than 60% of what
            is currently being spent by the Feds. Please let that simple fact sink

            OUCH! where did you find this “FACT’ in a cracker jack box?
            FY 2013 deficit is projected to be just over 600Billion with expenditures projected to be about 3.5 trillion. How does that equal 40%??? You must be using that new republican math?

          • SNAKESRULE says:

            17 TRILLION truthy. That right there is democrat math.

  10. Diamond Dan says:

    The Full Faith and Credit of the United States Government used to be as good as gold.  Now it is doubtful at best.  As a disabled veteran who retired from the Navy with 24 years of active service, and now Navy civili service employee, I used to think my retirment would be secure. A Navy pension, a VA disbility payment, Social Security and FERS pension seemd like a good, safe retirement income stream.  Now I fear all will be cut and cut again, until my monthly income in retirement will be poverty level at best. When I become homeless in retirement, I will self immolate on the U.S. Capital steps.

  11. Bosox824 says:

    Please remember to increase that contribution to the CFC during the campaign.  Managers like to see this because it makes them look good.  As our pay and benefits keep getting reduced many do not have a choice but to cutr back on charity contributions.  It is too bad but a reality for many.

    • downhill we fall again says:

      only ones giving to cfc are fat cats now so they know not to bug us as it just makes us really mad-no money from us ever again…

  12. wombat1951 says:

    “In other words, in order to distribute federal retirement payments, the Treasury Department has to pay the money from current revenue or borrow more money.”
    So the CSRS retirement fund was run just like Social Security — the actual cash employees contributed to it every paycheck was NEVER put away some where, but was spent.  And in it’s place are the same type of IOUs that are in the phony SS “trust fund” — not spendable assets, but only promises to pay when needed.
    Anyone who expresses surprise at this must still be putting their teeth under the pillow for a quarter.

  13. Angela says:

    I do not RELY on my FERS retirement. I rely on my TSP–and I recently switched all of my contributions to after tax ROTH contributions. If I retire and I have FERS, that will be just dandy–but I know that at the end of the day it’s up to ME to pay off my house, up to ME to save money–my success in retirement is up to ME! I’m not waiting for Social Security or FERS or any government program–because I have my doubts at the current rate of spending they will be around. 

  14. Retired Fed says:

    Does anyone believe that $761.5 Billion dollars would be sitting in a bank account while politicians ponder on how to cut a couple of trillion dollars out of the budget?

  15. Fed Retiree says:

    Does anyone really think that $761.5 Billion dollars would be sitting in a bank account while the politicians figure out how to cut another $2 Trillion dollars out of the budget?

  16. Deer30084 says:

    I took a federal job not only for the pay, but for the benefits.  I made a choice.  You all had the same choice.  It’s almost time for the federal government to PAY ME  MY RETIREMENT BENEFITS THAT WAS PROMISED TO ME.  I didn’t vote for OBAMA AND HIS SPENDING ADDICTION.

    • Angela says:

      Sorry, but 52% did. What happens when China says “no more”. Because when we hear the words “debt ceiling”, that’s what we are talking about–the amount that we have to borrow from China to pay our bills. I can’t believe people think it’s okay to “raise the limit” AT ALL! If we’re out of money at my house–we have to quit spending! 

  17. Retired says:

    We are in a huge hole but stating that Obama continues to spend more money is not correct.  The deficit greatly increased in Obama’s first year because of the wars and the recession.  What needs to be included in any discussion is that the deficit has gone down 2010, 2011, and 2012.  I realize the debt continues to increase and this needs to be dealt with by both sides but it is worth noting that the amount of deficit has continued to decrease.

    • wombat1951 says:

      Just BS.   Or did you forget about the “Stimulus” and “cash for clunkers” and all of those other Keynesian programs that failed to instigate a real recovery?

  18. B. Graham says:

    Now as ever, the only one that truly can be relied upon to provide one security, financial or otherwise, is oneself. We are largely on our own. Before about 1920 or so, federal employees had no pension. They worked until they dropped or, if forced to retire because of the infirmities of age or illness, were dependent for survival on the kindness of family or friends. Given its enormous debt burden, it’s not too difficult to imagine that the federal government may end up offering its employees greatly reduced benefits in the future, forcing people to fall back on their own resources. All we can do is save as much as we can in retirement accounts. Hope for the best, but prepare for the worst.

    • downhill we fall again says:

      children of today do not support old parents so the geizers will be pushed off the cliff more and more-it has already started

  19. Fedbens says:

    http://www.opm.gov/retirement-…   Also, BAL 03-309, for which there is a link in 12-307.
    Incredibly, Mr. Wong is right.  The Government really does pay 95% of the money that goes into the retirement fund for FERS employees.  Check it out.

    • Catherine Glass says:

       I had to pay 7.5% into mine to be able to draw.

    • Pat Fucile says:

       That would be an impossibility since as part of the FERS retirement plan is the TSP.   I know for a fact I’m putting in a lot more into that than the government is.  

      • Japygid says:

        Please check http://www.opm.gov/retirement-
        You will find this refers to ANNUITY funding, nothing else.  Not TSP, not Social Security, nothing.

        I’ll say it again: 95% of the money deposited into the retirement fund for FERS employees is from the Government.  Please verify this by checking the above reference.

        • Pat Fucile says:

          However,  the person you keep claiming is correct is saying that FERS, everything, is 95% funded by the government.

        • grannybunny says:

          Actually, the 94+% is from the agency.  For most government employees, that means the government.  However, for the large percentage of Postal retirees, USPS pays the agency share, using revenues paid in by Postal customers, not taxpayers. 

  20. 1EYEDJimmyBivvins says:

    Why dom’t you re-tell the story of the 1981-83 National Commission on Social Security reform chaired by Alan Greenspan. They knew SS could not continue as a pay as you go system. They enacted a hefty SS and Medicare tax hike which should have changed SS to a true pension or savings type retirement program. The commission shifted reponsibility for saving that extra money from the worker to the state. Unfortuneately the state failed its part of the deal. SS should have been removed as part of the unified budget and what was paid in invested for future SS payout. Instead this money was not only not invested it was spent by congress. In 2004 it was discovered that the 1.69 trillion dollars that resulted from the SS and Medicare tax increase created by the commission was gone. That money was spent by a group of unscroupulous overpaid buffoons and now we are relying on another group of the same to fix it.

    • wombat1951 says:

      Your history of what happened is wrong.   By 1980, the SS system was faced with negative cash flow in a big way.  The Commission decided that a huge SS tax hike was needed to prevent that.
      It was duly enacted.  What you were NOT told was that all of the huge influx of SS revenue above and beyond what was needed to pay current benefits was handled exactly the same way it had always been handled — spent by Congress and replaced by those IOUs.   This has been the way it’s been since 1940 — the only difference was that for the first few decades, there were fewer retirees on SS and more taxpayers per retiree paying the tax.
      The fraud was not in what was done, since it was doing what was always being done.   The fraud was pretending that it wasn’t being done.   For decades, politicians of both parties have LIED to us all about the true nature of how SS was being funded.
      And now many are learning that the Federal pension arrangments are exactly the same sort of Ponzi scheme.  Every penny of your own pay that was taken to fund your retirement was spent, and replaced by the same IOUs that fill the phony SS “trust fund”.

      • RETVET03 says:

        Sorry, it’s not a “phony” trust fund anymore than any bond I buy from a company is “phony”.  And like a bond, it’s a loan, and like any loan, there’s an obligation to pay it back.  That obligation ultimately falls on the taxpayers.  Simple as that.  If the taxpayers don’t want to pay it back….well we’ll see where that goes when it happens.  But as with any “unfunded liability”, it is spread out over time.  So enough of the 10923829308 trillquaddilnillbizillion scare tactics.

        Social Security is not a Ponzi scheme, not even close.  

        Other than that, I agree with you…just subtract a few points.

        • wombat1951 says:

          Retvet03 — the “bonds” placed into the SS trust fund and all of the other trust funds, including federal pension funds, are not marktable assets like bonds sold to the public.  They have no intrinsic value.  It is why all of these “trust funds” are empty vessels, containing nothing but a promise from one part of the government to another.   Called “inter-governmental debt”.
          You are 100% correct that taxpayers in the future will have to make good on these.   Which is why the very almost unimaginable size of these “unfunded liablities” are such an anchor around our kids and grandkids necks.   This is most definately NOT what we have been told by the politician all this time.   They have pretended like, and led everyone to believe, that all of the “trust funds” held actual assets — when they never did.
          SS is a Ponzi scheme.   Like a Ponzi scheme, the design was based on a serious demographic flaw that there would always be enough taxpayers to pay for the benefits of those drawing from it.   When you factor in the truth about the phony “trust fund” not containing any assets put away to be drawn on when needed, you will understand that when a system that starts out life with many taxpayers funding one beneficiary [in 1945, the ratio was 41 to 1] that morphs into one where less than 2 taxpayers are now doing it [in 2011 it was 1.75 tp 1] — Ponzi scheme is the perfect description.
          Look….I’ve been upset about this for some time, but until recently virtually nobody else noticed.   It is being noticed now partly because the SS system has transitioned again into where not enough SS revenue is being collected to pay current benefits, which has exposed the fraud of the “trust fund” — and partly because the deficit and debt in recent years have exploded, making some look also at the “promises” to fund things in the future as well as the actual public debt bomb being enlarged daily.
          The problem is that between the demographic time bomb and the explosion of the public debt, the very ability of the Federal government to make good on its promises to pay benefits to SS recipients, Medicare recipients, and of course Federal workers is at risk.   And that risk grows in direct proportion to the size of the public debt and other Federal spending largesse.   We are currently borrowing over 40% of what is being spent now.   Consider how interest on the debt will skyrocket when interest rates just go back to “normal”.  
          There are extremely serious fiscal problems with Federal finances, and it’s getting worse.   One party, the GOP, continues to pretend that the problem is easily addressed….while the other party, the Dems, don’t even think there is a problem!
          Sorry for another long winded post.   But as Pogo said long ago:  “We’ve met the enemy, and it is us!”

    • downhill we fall again says:

      yes our money was and is still being spent by congress pet pork projects to get re-elected with roads and bridges to nowhere except their own deep pockets

  21. jimijr says:

    The unfunded liabilty occurs due to moneys owed retirees. But they don’t owe it all at once, they have decades to pay it, the bill is not coming due in entirety. When I bought my home I acquired an unfunded liability. I depended on my future earnings to cover the costs. When I had a kid, same thing. It costs a hundred thousand or more to raise a kid but the bill isn’t due at birth.

    My point is that although the numbers look awful there is plenty of time for future earnings to cover the expense. Things are bad but not THAT bad.

    • grannybunny says:

      Thank you for pointing out that pay-as-you-go systems are not inherently evil.

      • wombat1951 says:

        But they are inherently flawed as those drawing from the Ponzi scheme begin to outnumber those paying the taxes supporting it.

        • $15300432 says:

          A voice of reason on this blog…be still my heart

        • grannybunny says:

          I disagree that pay-as-you-go systems are inherently flawed and with your equating Social Security to a Ponzi scheme.  Ponzi schemes have no legitimate purpose and are pure fraud.  Social Security has served Americans very well, does not involve fraud, and can — and should be — saved, so that it can continue on indefinitely.

          • wombat1951 says:

            It’s not that “pay as you go” systems are inherently flawed per se — but that the SS system was inherently flawed because of the demographic premise on which it was constructed.   Those demographics have come back to haunt the solvency of the system, as less than 2 taxpayers are supporting each retiree now when in 1945 it was 40 to one.
            As to fraud — what else would you call the decades long mis-representation of the “trust fund” as containing assets “saved” for the future, when the fact has ALWAYS been that every penny of excess SS tax revenue collected has been spent and replaced with non-marketable IOUs?   When defenders of SS continue to point to the “trust fund” as containing trillions of dollars when all it contains is trillions of inter-governmental debt?  When the “trust fund” is used as a prop for the supposed “solvency” of SS when the simple fact is that it contains nothing but IOUs?
            What is interesting is finding out that the same trust fund scam in SS has been perpetrated on federal workers with their pension contributions.  Not a dime of what federal workers had taken from their pay to support the system has been saved — like for SS, ALL of it has been spent and replaced with those non-marketable IOUs.   Meaning the the ability to cover all of these IOUs — SS, Medicare, Federal pensions — is wholly dependent on the government’s ability to find the actual money when the time comes.   And this ability is being seriously challenged by the impending fiscal disaster that is a government out of control WRT spending and borrowing.

          • grannybunny says:

            You are incorrect in claiming that Social Security trust fund money has “ALWAYS” been spent and replaced with special revenue bonds.  That practice started in the mid-1980’s.  And, there’s no fraud involved; the bonds are “assets,” and everyone has been aware of the practice.

          • wombat1951 says:

            I am not incorrect.   Please go to this official Social Security web page for a history of the trust fund.
            I was wrong about one thing — that is has always been just the inter-governmental IOUs in the fund.  As the SS web page outlines, up until 1960 it was a mix of investments that actually included REAL assets.  But since 1960 it’s been just the “special bonds”.
            1983 is a milestone date because that is when the rapidly failing SS system needed a quick and large influx of new funding because beneficiaries were outstripping SS revenues.  So a very large tax hike was instituted [in fact, it is this large SS tax hike that comprised most of the “Reagan tax hikes” that liberals like to point out].   However — nothing about how the trust fund was used changed from before.   As had been the case for decades prior, ALL of the excess SS revenue collected by this huge tax increase went to Treasury to be spent, and was replaced with those IOUs.
            As to calling what is in the trust fund “assets” — sorry.  No.   Please read this explanation about the true nature of what is in the “trust fund” —
            And please include in your reading this excellent summary about the whole scheme:
            The “solvency” of the system in 100% dependent on the ability of the government to find the actual money needed for paying benefits when those benefits demand it.  The stuff in the trust fund does NOTHING to help this.  As the SS Trustees themselves have said:
            “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”
            Put another way — every penny of excess SS tax taken from you and me over the years has been spent already.   We have been overtaxed all of these years by a corrupt government that was telling us that the “trust fund” contained actual assets put away for the future — when this was NEVER the case!   And now we learn that federal employee pension contributions were handled the exact same way [see Mr. Smith’s article of a few days ago — that contained almost word for word the same statement about the nature of the pension funds that the SS Trustees described about the SS Trust Fund}.
            Look — it’s a complicated topic and confusing.   Probably by design.   I still think the word “fraud” is not too harsh to describe what the government has been telling us all this time about the true nature of the “trust fund” — which contains no real assets.

    • $15300432 says:

      No business would be allowed on a ” give me a burger today and I’ll gladly pay you tomorrow philosophy” Its didn’t work for wimpy not does it work for anyone else

      • AnotherGuessed says:

        “Give me a burger today and I’ll gladly pay you tomorrow philosophy” is the very foundation of the banking industry, as in “Give me a loan today and I’ll pay you back tomorrow, with interest”. Well, now we know you’re not  a businessman or an economist.

  22. OldRet says:

    OK…I get it. You want to change the rules AFTER everyone has retired so in ten year all of those people can start collecting government benefits because their retirement is now worthless.

  23. Lacy says:

    Cut. Slash. Eliminate.  EVERYBODY must feel the pain.

  24. $15300432 says:

    The only reason why FERS isn’t in the same boat is OPM keeps raising the taxpayers contributions so that now the taxpayers fund 95% of FERS.
    There is no doubt that ALLLL feds will start paying more or that COLA’s will have to end. No private pension plan is indexed to inflation nor should any govt pension fed state country or city

  25. Comrade1917 says:

    Federal retirees will receive fewer COLA increases in the future.  

    Inflation will destroy the purchasing power of the U.S. dollar.

    Inflation is the cruelest tax of all, comrades.

  26. Ed Nopp says:

    It seems to me that many talk about Social Security Payments as an “entitlement” as if that is a dirty word. Social Security is an “entitlement” because we paid our own money into it. The government “borrowed” that money and now begrudges us to collect our own money back. Federal employees have also paid into their retirement programs and therefore their “entitlement” is due them also. The difference is that I haven’t heard or seen anybody mention the federal retirement program referred to as an “entitlement” and surely has not been referred to in a negative way. My opinion is that neither one of these programs should be demonized by anybody, but Social Security has surely been for some time now.

    • $15300432 says:

      when the taxpayers fund FERS to the tune of 95% its hardly a situation of entitlement its welfare pure and simple

      • Pat Fucile says:

         Either you aren’t a federal employee or you are really clueless about FERS.

        • theinnerring says:

          he has never been a federal employee

        • $15300432 says:

          If you think feds pay more than 5% for FERS your another fed that has no idea of how there total compensation is  computed

          • Pat Fucile says:

             Really?   Lets see, the FERS retirement consists of three parts.   The define pension, Social Security, and TSP.   The only part that is mostly paid by the government is the defined pension portion.       The Social Security portion is paid 50% by the employer (in this case the government) and 50% by the employee.      TSP, the government will match up to 5% of the their annual pay, if the employee puts in 5% or less of their annual income the most the government would pay towards this portion is again only 50%.   However, if the employee puts in more than 5% of their income, the percentage that that government pays towards the TSP portion of FERS retirement drops below 50%.      

            And you claim I have no clue?   At least I know FERS consists  more than just a defined pension.  And because I’m smart enough to know this, I know your claim is full of BS.

        • Davesandbrook says:

          Ignore the troll.  He always posts inflammatory and ignorant drivel just to get a reaction.

      • Fed_Peasant says:

        Are you a former “birther”?

        • $15300432 says:

          Nope I’m a truther…they are few and far between on this blog

          • AnotherGuessed says:

             What you are is “the Democratic Strategist’s Best Friend”. It was politicians displaying attitudes like yours,  that handed November’s victory over to Obama. (I’m a Democrat, so “thanks!!!!”)

          • $15300432 says:

            As Ron White so eloquently has said about your ilk “you can’t fix stu@id” an as ems are quickly finding out as Maggie Thatcher said socialism works well until they run out of other people’s $$ to spend.

          • AnotherGuessed says:

             Don’t blame me… your “ilk” got Obama re-elected.

          • $15300432 says:

            Sorry it was the 47% who don’t pay taxes that want the free ride to continue

          • AnotherGuessed says:

             Check your math… he won by more than 50% of the popular vote.

          • fednojob says:

            The remaining 3+ % was illegals and dead voters

      • boatdoctor says:

         onedonewong – you DO NOT have any credibility here. Your statement contains NO facts and is far from the truth.   Stay out of conversations which you don’t have any knowledge and stick to whatever it is you do every day. 

    • grannybunny says:

      “Entitlement” simply means one is legally eligible for a benefit.  Some benefits — like Social Security — are earned.  Others — like SSI — are not.

    • Ed S says:


      Ed, I agree with you. The word entitlement is being used as
      a dirty word. But, our congress (the House and Senate) and the President of the
      US, has always demonstrated that they cannot manage a budget.  Each and
      every elected federal official has a staff of paid people who can supply them
      with the correct way of handling budget issues. These  officials  pat
      these people on the head and say, “good job” and then proceed to what
      their political parties wants them to do or, what their power tripping, swollen
      egos want to do. This part of our political system is broken. We dumb Americans
      were never outraged when a few in congress or the senate tried to pass campaign
      finance reform or pass a balance budget amendment. Now, it’s a problem,
      the elected officials (Demarcate and Republican), that we have trusted, has led
      the country into this financial situation. THEY DID IT AND WE LET THEM! The
      biggest corporations of the world use their budget departments to establish how
      their money is to be spent. But, WE THE STUPID PEOPLE use politicians to manage
      the country’s budget!  History has shown that time and time again, you
      can’t control the world, if you try, you collapse, EVERY TIME!  I have
      read THAT the  US has over 400,000 troops deployed all over the world
      RIGHT NOW, to “keep us safe”. This “deployment” has never
      come up in the budget debates; it’s always the entitlements of OUR citizens. We
      have to rethink THIS and PRIORITIZE it to keep our country from collapsing
      financially, and to “keep us safe”.  Don’t get me wrong, ALL
      entitlements should be earned and MANAGED correctly, i.e. don’t collect Social
      Security taxes from people and employers for more than 60 years, steal the
      money, and then tell people at retirement that they’re all
      moochers!   So we can continual to be stupid and not do nothing 
      or get involve and at least write our elected officials. Let’s not be stupid
      anymore; forget what political party we belong to (be an American first), 
      and tell our politicians to prioritize where money is being spent first before
      any tax increases or what entitlements are cut, and drop the crap of wasting
      time on what ballplayers are doing steroids, really!! I believe that there are
      some of our existing politicians (Demarcate and Republican) who want to do
      the right thing; they just need us to rally behind them.

    • DeathWatch says:

      When the Federal Government defined social security as the 3rd leg of our retirement system (FERS) it became a legal obligation.  Not everyone pays equally into social security–it isn’t a legal obligation for people such as survivors and if survivors already receive a benefit they can have the higher of the two amounts as a survivor?  One thing that amazes me is that someone who becomes disabled will receive more than what I would receive after a lifetime of toil–per my social security statement.  This is particularly annoying as I have seen a number of people collecting disability who are most certainly able.    

      • $15300432 says:

        Your right SS is part of your retirement. But just as Medicare contributions have gone up and SS contributions have gone up FERS needs to insure its properly funded. Having the taxpayers pay 95% of FER’s isn’t “proper funding”. You should be more upset about civil servants that are drawing DR with a partial problem fully capable of working but don’t. There are more people on DR from the federal govt than on military disability. That should give you a good idea of how its abused

    • Scion dePublius says:

      It is interesting to note that this discussion, as with others on the fictional “debt ceiling”, chose to completely ignore that scrap of pocket notes called “THE CONSTITUTION OF THE UNITED STATES”.  While amending this document for the fourteenth time, this topic is expressly covered in Section 4:  “The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions … shall not be questioned.”  Obviously, as far back as 145 years ago, in the post-Civil War reconstruction, attempts were being made to screw pensioners and make them pay for the wars and follies of others (sound familiar?).  This amendment put a stop to it then, as it should today!!

    • Scion dePublius says:

      It is interesting to note that this discussion, as with others on the fictional “debt ceiling”, chose to completely ignore that scrap of pocket notes called “THE CONSTITUTION OF THE UNITED STATES”. While amending this document for the fourteenth time, this topic is expressly covered in Section 4: “The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions … shall not be questioned.” Obviously, as far back as 145 years ago, in the post-Civil War reconstruction, attempts were being made to screw pensioners and make them pay for the wars and follies of others. This amendment put a stop to it then, as it should today!!

  27. Anonymous Coward says:

    With no younger employees (with a theoretically longer work life) paying into the retirement system, this should be no surprise.

    My office has not hired anyone from outside government or under 40 in more than a decade, and never recruits for positions lower than GS-12.

    I, on the other hand, will be working long past CSRS eligibility because I cannot afford to retire.  (Screw Kudlow and his lies!)

  28. Jchemist says:

    The CSRDF would be fine if congress hadn’t used it as it’s own personal slush fund over the years. Just shows the nerve of congress to complain about problems they caused!

  29. OldRet says:

    How can you possibly know what liability you have when you don’t know when people will retire, how much they will collect, and how long they will live. It’s all guesswork. This is just a bogus projection to stir up even more controversy and cite another reason to cut current Federal employees benefits. The govenment creates FERS and then says that there aren’t enough CSRS employee and employer  contributions. You have millions trying to collect their CSRS pensions and all of the new employees since the early 80’s are contributing to FERS. Guess what…you’re going to have a CSRS deficit. Gheez!!!

    • $15300432 says:

      There are actuarial tables devise by smart folks that address you question. Unlike govt employees this isn’t guess work but is based on historical data

      • Timbre says:

         If you paved a road with statisticians, it would be a hell of a bumpy road, leading you everywhere without getting you anywhere.

      • TimbreTim says:

         If you paved a road with statisticians it would be one hellofa bumpy road, leading you everywhere without getting you anywhere.

        • $15300432 says:

          Not having  any sound data only leads you to an economy that adds trillions of new debt every year…Ohhthe obama math

      • Pat Fucile says:

         Wow, stick with your grade school math the dude.    Actuarial tables are still just probabilities, ie the likelihood something will happen.    In other words an educated GUESS when something will happen based on data used to compile the table.      You can have an outlier (do you even know what that is union boy) that does even come close to being represented by the tables.     And this is assuming the tables are relatively accurate and weren’t created by bad data, there isn’t some new data to be computed into the calculations that change the results in the table, etc.     

        And no, this isn’t bashing actuaries.   The actuarial tests are brutally hard.  

        • grannybunny says:

          You are absolutely correct that “actuarial tables are still just probabilities.”  One of the reasons the Postal Service has been forced to so hideously overfund its retirement accounts is because the actuarial assumptions that apply to employees of other government agencies are a poor fit for Postal employees, who — for example – tend to work longer and retire later than other Federal employees.  There is a move afoot to customize the formulas setting the payment amounts USPS has to pay into the Treasury by using data specific to Postal workers. 

          • Japygid says:

            It is true postal employees are less likely to progress as much as non-postal employees, salary-wise.  The USPS salary structure is a lot broader at the bottom than other salary structures.  But this is no reason, in my opinion, to “customize the formulas setting the payment amounts” for them.  In a workforce of 3+ million doing all kinds of work all over the planet you are going to find pools of employees here and there who do a lot better, or a lot worse, than “average” employees.  This is no reason to “customize the formulas” for them, whether they are USPS, or whatever.

          • grannybunny says:

            I can think of 60-85 billion reasons to customize the formula, one for each dollar the erroneous formulas have caused USPS to overfund its accounts.  The spread exists because the CSRS overpayment ranges from $50-75 billion, depending upon which audit one accepts.  Absent these overpayments, the Postal Service would be wildly profitable, instead of teetering on the very brink of bankruptcy.

          • Japygid says:

            The postal service made a big fuss over this in the last couple of years.  Did anything result from their protests?  If so, then maybe there should be a major demographic study of federal retirees:

                 1.  find the ones that live longer, and collect longer, than others.  Make them pay more.
                 2.  identify those that have lower journeyman levels in their jobs, who thus get a lower return on investment.  Give them a break on their pension contributions.
                 3.  how about those who work in more stressful jobs, and are more likely to be disabled?  Maybe there should be some kind of annuity “fix” for them, too.
                 4.  and on and on.

            “Erroneous” formulas?  No, I don’t think so.  “Overfund its accounts”?  No, the Postal Service does not have “accounts” in the retirement fund, and even if they did they are not overfunded.

            Should there be special treatment for postal service employees in this area?  No, not in my opinion.

            Is this issue still pending?  It needs to be put to rest. 

          • grannybunny says:

            The Postal Service is not seeking “special treatment,” to the extent that term connotes some type of advantage.  But, it certainly should not be required to continue to “bail out” all the other agencies and — by extension — the taxpayers at the expense of its own survival.

          • Japygid says:

            Okay.  But is the issue still pending?  Or has it been resolved one way or another?

          • grannybunny says:

            No, of course it hasn’t been resolved.  OPM claims it is powerless to stop — or refund — the excess funds without specific authorization from Congress.  Congress, well, Congress hasn’t done anything constructive for a long time now.  For the past 3 years, USPS has been continually seeking Congressional relief.  The prior Senate passed a bill that — at least — addressed the FERS overfunding.  The House couldn’t even get its bill out of Committee, even though the Committee Chair and Vice-Chair were its sponsors.  And, needless to say, Congress has little incentive to meaningfully address a problem that has been a financial windfall to themselves, OPM and the taxpayers.

          • $15300432 says:

            There is NOTHING to refund the tables used have now shown to be SPOT on

          • A Guest says:

            Exactly!  Besides Congress is too busy mugging for the Cable News shows each day.

          • $15300432 says:

            Granny stop with the UNION pap. OPM has looked at the data in Nov of 2012 and have concluded that the over funding is no more than $1 Billion.

          • grannybunny says:

            Please stop with your campaign of misinformation.  I don’t believe in wrestling with pigs, because you just get all dirty, and the pig enjoys it.

          • $15300432 says:

            Granny time for you to stop drinking the union koolaid and do a little independent research. The number I provided was released in Dec 2012

          • grannybunny says:

            I know you do this just for sport, but someone not knowledgeable about the issues might actually believe some of your wild statements.  The current estimates for the CSRS overpayment are $50-75 billion, as there were 2 separate audits, and their results varied.  The current, best, estimate for the FERS overpayment is almost $10 billion.

          • $15300432 says:

            I have to agree the unions were cooking the books about “over funding” it now turns out that there is no me than $1 Billion in excess contributions not the $15 the union claimed

          • grannybunny says:

            The unions have nothing to do with the funding of USPS’ retirement accounts.  CSRS is overfunded by $50-75 billion — depending upon which audit one accepts — and FERS by approximately $10 billion.

          • $15300432 says:

            Granny time to turn off the union news and take a look at OPM’s analysis released last year. As usual your behind the times. You know I have a suggestion rather than just thow the newspapers out rather than deliver them why not sit and read one for a change and then take your 2 hour smoke break

        • $15300432 says:

          Sorry patty its a data driven estimate. For some one who claims to have a background in math you must struggle to count to 20 with your socks on

          • Pat Fucile says:

             It is still just an estimate, a guess.   If the best you can do is come up with some puerile insult, you’ve lost the argument.  

      • OldRet says:

        …and Obamacare will save money too!

    • AnotherGuessed says:

      Go to wheredidmytaxdollarsgo dot com, and you will see that if you calculate tax based on  %50,000 income for a married couple filing jointly, the portion of tax going to the CSRSDF is a whopping 0.7% of their tax burden. (You will have to look for it, under the “General Government” pie slice.) By the time the last CSRS annuitant dies off, sometime around 2070, this figure drops to “zero”.

      I don’t think that FERS even made it to the chart.

      This figure is not excessive, to protect the “Full Faith and Credit of the U.S. Treasury”, given the negative consequences of failing to do so.

      Of course, a figure of 0.7% doesn’t get the same political mileage as a figure of $761B, nor would it sell as many “hits” on on-line magazines.

      • redauburn says:

        I think 2070 is way too far away.  I don’t know any CSRS person that will live that long.  CSRS were hired before 1984 I believe, so those have almost 30 years in, lets say they are 50 now, another 50 years will make them 100, I seriously doubt too many will live to be 100 – realistically anyway

        • grannybunny says:

          Few live to 100, but they could have younger spouses collecting survivor’s benefits.

        • AnotherGuessed says:

           I just figured “worst-case”. More realistically,  a person hired in 1984 under CSRS, at age 18 would turn 75 (currently the average lifespan in the U.S.) in 2041. Surviving spouses still collect bennies, but at almost half the rate. Either way, CSRS will shortly begin a quick decline in terms of cost, eventually disappearing entirely.

  30. Kevin S says:

    There’s no reason to spare the social programs, including retirement benefits, from cuts. Government finances have been so mismanaged for so long that the repercussions will reach far.

    • Guesst says:

      There is a reason.  The more retirement programs are cut the more the population becomes entirely dependant on Social Security.  Business has been able to pass of the burden of retirement largely to the public sector over the past 30 years, and as greater numbers of people become increasingly dependant on Social Security it will only be harder to limit costs.  The government can follow the private sector and cut public pensions and show a near term savings, but in the long term the costs for will have to be born by the public for SS and  indigent care of elderly government retirees-just another form of fiscal mismanagement,  part and parcel of the overall economic decline of the country and lowering of overall living standards.