Many Republicans have been calling for reform of the Federal Employee Retirement System (FERS) for quite some time. Consequently it was of little surprise that President Obama has included in The President’s Plan for Economic Growth and Budget Deficit Reduction is the proposal to increase federal employee’s pension contribution. His proposal, increasing the current 0.8 percent of regular pay to 2.0 percent, represents a 150 percent increase in cost to a federal employee. The average federal employee will see nearly $600 less in the check each year due to this retirement tax while saving the government $21 billion over the next ten years.

Comparing Congressional Pensions to Federal Employee’s Pensions

While many congressional republicans have successfully cast federal employees as overpaid with fat pensions funded by the American taxpayers, the facts tell a slightly different story. The average federal employee earns about $75,000 in regular pay while the average congressional salary is $174,000 annually. Regular federal employees earn a pension equal to 1 percent of their pay for each year of service and this is increased to 1.1 percent for those employees who have over 20 years of service and retire at age 62 or later. Congressional pensions are much different! Congressional employees, Representatives and Senators earn 1.7 percent of their annual salary for the first 20 years of service and then 1 percent for each additional year of service. Another difference is that congressional employees pay 1.3 percent of their salary to the pension fund compared to the current 0.8 percent that regular federal employees pay.

So just how fat are federal employee pensions compared to a congressional pension? To do a proper comparison we’ll compare a federal employee (The Fed) with 20 years of service who just turned 62 and is eligible to retire with a congressman or woman (The Con)who has been in office for 20 years. Average annual pay for the Fed is about $75,000 annually compared to the Con’s $174,000 annually. Since the Fed has 20 years of service and is age 62, the pension multiple is 1.1 percent for each year of service and the Con’s pension multiple is 1.7 percent for each year of service. Doing the math yields the Fed a pension of $16,500 annually before deductions for taxes and health care benefits. The pension for the Con is $59,160 annually before deductions for taxes and health care benefits.

• T Rowe Funds

• Expense Phone Refunds

• Fidelity 529 Funds

• Principal Investors Mutual Funds

• Exempt Money Market Funds

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