The Public-Private Employee Retirement Parity Act was put before Congress in November by Senators Richard Burr (R-North Carolina), Tom Coburn (R-Oklahoma) and Saxby Chambliss (R-Georgia). The legislation is designed to end the defined benefit (DB) pension portion of the Federal Employee Retirement System (FERS) for new federal government hires starting six months after enactment. The bill would also fully leave in place the Thrift Savings Plan with the current match (up to 5%) for both current and future federal workers.
“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,” says Burr. “We cannot ask taxpayers to continue to foot the bill for public employee benefits that are far more generous than their own.”
The bill would also apply to members of Congress. Burr and Coburn originally submitted the bill to Congress in 2011 (see “Burr-Coburn Bill Would Alter Federal Pensions”).
Coburn agrees that federal retirement benefits need to be adjusted. “Generous pension plans for members of Congress have helped turn congressional service into a career rather than a calling. 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.”
Chambliss added: “Americans have demanded their leaders make the necessary changes to our fiscal policies to put our nation on a track to sustain economic growth and real job creation. The Public-Private Employee Retirement Parity Act is a small change that will have a big impact on our debt and deficit.”
Currently, federal workers enjoy both a DB pension and a Thrift Savings Plan—equivalent to a 401(k) plan—with up to a 5% employer match, which is paid for by the taxpayers. By comparison, say the senators, 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 after they retire, a benefit that is becoming increasingly rare in the private sector.
The legislation will require an annual report on the actuarial status of the federal retirement system, which will need to be publicly available online by January 31 of each year. According to the most recent Office of Personnel Management’s Civil Service Retirement and Disability Fund annual report, the FERS system was underfunded by $20.1 billion for fiscal year 2012.
In the coming years, as more of the retirement burden falls on the FERS system, say the senators, the required federal government contributions to FERS will increase, 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 an estimated $239.5 billion, with the government paying out $415.3 billion in benefits.
The senators note that current federal government employees and retirees would not be impacted by the changes outlined in the bill.