U.S. Senator Richard Burr (R-North Carolina), along with Senator Tom Coburn (R-Oklahoma), have introduced the Public-Private Employee Retirement Act of 2011 “to address long-term liabilities facing the federal government”. According to a press release, the legislation would end the defined benefit pension portion of the Federal Employee Retirement System (FERS) for new federal government hires starting in 2013, leaving fully in place the Thrift Savings Plan with the current match (up to 5%) for both current and future federal workers. The bill would also apply to members of Congress. However, current federal government employees and retirees would not be impacted by the changes in the Burr-Coburn bill.
“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,” said Burr, in unveiling the legislation. “We cannot ask taxpayers to continue to foot the bill for public employee benefits that are far more generous than their own.”
The bill’s sponsors note that federal workers currently have both a defined benefit pension and a Thrift Savings Plan (equivalent to a 401(k)) with up to a 5% match, while 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, an increasingly rare benefit in the private sector, according to the announcement.
The senators note that the FERS system is currently underfunded by nearly a billion dollars, and that the old federal pension system, the Civil Service Retirement System (CSRS), is underfunded by $673 billion. “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 will contribute $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,” according to the announcement.
“The congressional pension plan currently in place only serves to foster political careerism and should have been frozen years ago. In addition to enjoying a better benefits package, federal workers generally earn up to 20 percent more than their private sector counterparts. When American families across the country are being asked to sacrifice in order to meet their basic needs, federal employees and members of Congress should not be the exception. Defined benefit pension plans are going belly-up across the nation because politicians and employers continue to make promises they cannot keep. Existing federal employees will be unaffected, and all federal employees would continue to enjoy a 401(k)-style pension plan with a very generous federal match. But the only responsible thing to do is stop making irresponsible commitments and forcing future generations to pick up the tab,” said Dr. Coburn.