Federal Retirement Provisions: Employees vs. Congresspersons

The article compares retirement benefits for Congressional representatives and federal employees

By Bob Starman, Service Officer for NARFE Chapter 182, Las Cruces, NM. The information is based on 40 years experience as a Personnel Manager, primarily with the Dept. of Army, and resource material from the National Association of Active and Retired Federal Employees, the Office of Personnel Management, and the Social Security Administration.

This article has been prepared to dispel misinformation about Congressional retirements.

Employees or Congresspersons hired or appointed prior to 1984 were covered by the Civil Service Retirement System (CSRS). They remained under CSRS unless they converted to FERS during a 1987 or subsequent open season. Public Law 98-21 established a new program called FERS–the Federal Employees Retirement System.

Permanent Federal employees hired after 1983 and all Congresspersons appointed thereafter are subject to FERS. This system provides a combination of Social Security, a retirement plan, and a savings plan similar to a 401K. Congresspersons appointed prior to 1984 staying with CSRS also became subject to Social Security payments. There is a 5-year vesting requirement except for disability. Therefore, a Congressional Representative must serve at least 3 two year terms in office before becoming eligible for an eventual retirement. All employees on the rolls on and after January 1, 1983 began paying into the Medicare fund and were immediately grand fathered in for Part A coverage.

Cost of living adjustments based on the CPI-W are made annually under both retirement plans, as is Social Security. There are significant differences in the retirement plans for Firefighters, Law Enforcement and FAA controllers (not covered in this article). However, Postal Service employees and retirees are in plans identical to those described here.

a. To CSRS 7% 8%
b. To SS and/or Medicare 1.45% Med 7.65%(6.2-SS; 1.45-Med)

Annual annuities are based on two elements: highest salary averaged over 3 consecutive years of service and factors based on years of creditable service (example calculations follow). Retirement eligibility is based on one of the following minimums: 30 years service at age 55; 20 years service at age 60; or 5 years service at age 62. There are also provisions for Disability or Discontinued Service retirement (age 50 with 20 years service or any age with 25 years –substantial penalty for each year under age 55). CSRS employees/congresspersons are limited to a maximum annuity of 80% of high 3 salary (plus credit for unused sick leave). This occurs at 42 years of creditable service for employees or 32 years for a Congressperson. Employees under CSRS may also participate in a non-matching savings plan up to 8% of salary.

ANNUITY CALCULATIONS Total of 16% for the first 10 years, thence 2% per year thereafter 2.5% for each year
EXAMPLES (annual annuity)
Age 60 with 20 years service 3 yr avg=$50K x .36 = $18,000 Based on current salary of $150K x .50 = $75K
Age 55 with 30 years service 3 yr avg=$50K x .56 = $28,000 $150K x .75 =$112,500 (near the 80% max)
a. To SS and Medicare 7.65% (6.2-SS, 1.45 Med) Same
b. To FERS 1.0% 1.3%
c. To Thrift Savings Plan Up to 13% of salary Same

Annual Annuities are calculated by using the high 3 average annual salary and a factor based on years of creditable service. Eligibility is also based on the same criteria as CSRS (years of service and age) except that FERS is more flexible with early retirements although substantial penalties are imposed for early retirement.

a. FERS 1.0% for each year of service* 1.7% per year up to 20, then 1.0% thereafter
b. Social Security See below Same
c. Thrift Savings Plan. Employees/Congresspersons automatically receive a 1% contribution. The Government will match up to 5%. Up to 13% in total contributions is allowed during 2003. Eligibility to withdraw is the same as for a 401K.
*At age 62 with 20 or more years service, the factor increases to 1.1% for additional years.
EXAMPLES (Annual annuity)
1. Age 60 with 20 years service 3 year avg = $50K
$50K x .20 =$10K
3 year avg = $150K
$150K x .34 =$51K
2. Age 65 with 30 years service $50K x .33 = $16.5K $150K x .44 = $66K

SOCIAL SECURITY. During 2002, deductions from income were limited to the $84,900 salary or income level. This maximum increases each year based on cost-of-living adjustments. The maximum benefit that could be paid to an individual in 2002 was $1,660. Maximum SS benefits are dependent largely on median to higher incomes as well as 35 or more years of coverage. For 2002, the average SS benefit for an individual was $874 per month while an eligible couple received $1454. Although CSRS retirees did not pay into SS while employed with the Federal Government, they may have earned 40 or more quarters of coverage either before or after Government employment thereby entitling them to a small SS payment. However, most retirees are affected by other laws passed in the late 70’s and early 80’s, such as the Government Pension Offset (GPO) which usually denies a spouse a spousal Social Security annuity if they are also entitled to a retirement under CSRS, and, the Windfall Elimination Provision (WEP) which typically cuts SS entitlement to 50% or less for the retiree. Retirees of any city, county or state retirement system that did not include SS deductions are affected by these laws.

SURVIVOR ANNUITIES are optional. They provide a surviving spouse up to 55% of an employees/retirees annuity under CSRS, or 50% under FERS. For electing a maximum survivor annuity, the retiree suffers about a 10% reduction in their own annuity-similar to buying a life insurance policy which may be an alternative if considered at a younger age. However, a minimum survivor annuity of about $3600 per year ($90 deduction from annuity) is always encouraged in order to allow the surviving spouse to retain Federal Health Benefits coverage.

FEDERAL HEALTH BENEFITS are optional and are also available to Congresspersons at the same rates and coverage. The Federal Employee Health Benefit Program is considered comparable to programs offered by industry and big business. Employees and retirees are in the same group plan and typically pay about 30% of the total monthly premium or in excess of $200 per month for family coverage in most plans. Deductibles and co-pays for hospitalization, prescription drugs, doctor visits, etc, vary by plan selected. Blue Cross is a popular plan wherein co-pays for a 90-day supply of prescription drugs by mail are $10 for generic or $35 for brand name. Co-pays at the local drug store are 25% of the total cost. Retirees enrolled in Medicare Part B have most deductibles and co-pays covered except for drugs.

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. Follow Ralph on Twitter: @RalphSmith47