Senators Propose to End Defined Benefit Pensions for New Federal Employees

Three Senators have reintroduced legislation that would end the defined benefit pension portion of the Federal Employee Retirement System (FERS) for new federal government hires.

Senators Richard Burr (R-NC), Tom Coburn (R-OK), and Saxby Chambliss (R-GA) have reintroduced legislation that would end the defined benefit pension portion of the Federal Employee Retirement System (FERS) for new federal government hires starting six months after enactment. Current federal government employees and retirees would not be impacted by the changes.

Known as the Public-Private Employee Retirement Parity Act, the Senators say the legislation is necessary to cut costs that have become unsustainable.

The bill would leave the Thrift Savings Plan fully in place with the current match (up to 5%) for both current and future federal workers. The cuts it makes would also apply to members of Congress.

The Senators said in a press release that federal employees currently enjoy a costly benefit that is unavailable to the average private sector worker which is creating an untenable cost burden for taxpayers. “Federal workers enjoy both a defined benefit pension and a Thrift Savings Plan (equivalent to a 401(k)) with up to a 5% match, paid for by the taxpayers.  The average private sector employee gets a 401(k) with a 3% employer match and no pension.  Federal workers also continue to enjoy federal health care benefits (FEHBP) after they retire, a benefit that is becoming increasingly rare in the private sector,” according to the press release.

Speaking on the legislation, Senator Burr said, “Right now, federal government workers receive far more generous retirement benefits than private sector employees.  The cost to taxpayers of these benefits is unsustainable and we simply cannot afford it. We cannot ask taxpayers to continue to foot the bill for public employee benefits that are far more generous than their own.”

Senator Coburn added, “Generous pension plans for members of Congress have helped turn congressional service into a career rather than a calling. At the same time, federal workers enjoy a better benefits package and higher overall pay than most taxpayers – even at a time when many Americans are still simply looking for a job.  This status quo is unsustainable and needs to be reformed.”

The legislation will require the Administration to make the annual report on the actuarial status of the federal retirement system publically available online by January 31st each year. 

According to the most recent Office of Personnel Management’s Civil Service Retirement and Disability Fund annual report, the FERS system is currently underfunded by $20.1 billion for fiscal year 2012.  In the coming years, as more of the retirement burden falls on the FERS system, the required federal government contributions to FERS will skyrocket, especially in comparison to what federal workers will put into the system.  In 2012, the Federal government contributed about $22.2 billion to FERS. By 2065, those required contributions will rise to $239.5 billion, with the government paying out $415.3 billion in benefits.

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Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.