Refusing the Federal Health Care and Retirement System: One Congressman Wants Out

One Congressman has taken a stand that is popular with many in his district by announcing he is not using the federal health benefits program or the FERS retirement system because they are better than the benefits available to many taxpayers. How is this likely to work out for him?

A recent article posted on the FedSmith site (Congressman Ron DeSantis says he won’t accept pension, health care plan) generated a number of queries and comments from readers. Congressman Ron DeSantis announced at a town hall meeting last week that he plans to forgo the pension and health care plan available to all members of Congress. The reason: he is more interested in serving his constituents than earning the congressional benefits. He also stated that “Members of Congress are going up there to serve. But you’ve got to come back and live under the laws you have and you shouldn’t give yourself any better benefits than the rest of us.”

According to his press release, he and his wife have purchased health insurance that is both less generous and costs more than the congressional health plan subsidized by American taxpayers. His press release states: “Members of Congress receive federally funded health insurance benefits that exceed the health insurance benefits possessed by many Americans, especially those who have been or will be negatively affected by the 2010 health care law.”

The Congressman is obviously a smart guy. According to his official biography, he worked his way through Yale University, where he earned a bachelor of arts, magna cum laude and also graduated with honors from Harvard Law School. He has also served as a Naval Officer and as a federal prosecutor. He won election to Congress from Florida’s 6th district in 2012.

While that rationale has considerable appeal to many people, undoubtedly including many voters in his district, there may be a problem with at least a portion of his argument. He is not required to participate in the federal employee health benefits program (FEHB).

As with many government programs, there is a benefit  from the program but, whether you want the benefit or not, a person will find it is difficult not to participate. As with a number of government programs, once it goes into effect and, whether one needs or wants the benefit, there will still be a price to pay for it. In other words, the program isn’t voluntary. If you are part of the target group, you will probably have to pay for the benefit. It is not a voluntary act—you get it whether you want it or not.

In this case, the Congressman is likely to find he cannot refuse to participate in the FERS system.

Payments into FERS by Members of Congress

Members of Congress under FERS contribute 1.3 percent of their salary into the FERS retirement plan and pay 6.2 percent of their salary in Social Security taxes. Members of Congress are eligible for a pension when they are 50 years old  if they have completed 20 years of service. Members are eligible at any age after completing 25 years of service or after they reach 62.  Members of Congress have to serve at least 5 years to receive any  pension. Members of Congress first elected after 2012 and enrolled in FERS contribute 3.1% of pay to the Civil Service Retirement and Disability Fund (CSRDF) in addition to their Social Security contributions. In 2013, Members covered by CSRS Offset pay 1.8% of the first $113,700 of salary, and 8.0% of salary above this amount, into the CSRDF.

Regardless of his personal preferences, he still has to pay into the system. He would not be vested for five years in any event. He is 34 years old so he is at least 23 years away from drawing a retirement benefit, assuming he is reelected several times. If he does not get re-elected, he wouldn’t be eligible for any retirement pay from the federal retirement system until he is 62, in September 2040. He would be eligible for some benefits at that time.

DeSantis wants to end members of Congress’ eligibility to participate in the system and he says he will file a bill to accomplish that end.  While this may be  a very good idea as it would discourage some from having an entire career in Congress. But, regardless of the merits, such a bill is unlikely to pass as many elected representatives view being elected to Congress as their career job and they want that benefits those serving in Congress have already voted to award to themselves.

About Those Congressional Pensions

As of October 1, 2011, 495 retired Members of Congress were receiving federal pensions based fully or in part on their congressional service. 280 had retired under CSRS and were receiving an average annual pension of $70,620. A total of 215 Members had retired with service under FERS and were receiving an average annual pension of $39,576 in 2011. Congressional pensions, like those of other federal employees, are financed through a combination of employee and employer contributions. All Members pay Social Security payroll taxes equal to 6.2% of the Social Security taxable wage base ($113,700 in 2013).

New federal employees hired on or after January 1, 2013 are also now  paying more for their FERS retirement coverage than employees who were already working for Uncle Sam. The increase (2.3% across the board) raised deductions for new regular employees from 0.8% to 3.1%, and deductions for new “special category” and Congressional employees from 1.3% to 3.6%.  Employees paying the new higher rate are categorized as FERS “Revised Annuity Employees,” or FERS-RAE.

Congressman DeSantis says he will not participate in the retirement system at the time he does become eligible. He does not have to file for the retirement benefit when he becomes eligible but, unlike a private insurance plan, he will still have to pay into the system while he is in Congress.

He is now presumably paying 1.3 percent of his annual salary of $174,000 (or $2,262 a year) into the retirement system.

Moreover, if he should ever use the benefit,  the Internal Revenue Service is also likely to expect him to pay taxes on any future retirement income he receives from FERS, even if he refuses to cash the check, throws the check away or gives the money to charity. And, depending on how the system works in future years, while he will lose the use of his own money, he may be able to get the money back from the government.

In other words, the underlying philosophy is that the system provides a benefit, it is a good benefit, and he will have to pay into it. Refusing to comply with the system is not an option because it only works if everyone is forced into paying for it. So, while the Congressman is certainly aware that even though we are living a a country that most of us probably believe exists to allow individual freedom of action and thought, we have created a system that demands payment when the government decides it is in the best interests of those who ultimately receive the benefit. His bill and his actions are unlikely to change that system but his stance may help him in his district if or when he runs again.

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