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OhOh, Federal Pensions Getting Problematical
Old 09-30-2011, 01:28 AM   #1
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OhOh, Federal Pensions Getting Problematical

"Retirement programs for former federal workers civilian and military are growing so fast they now face a multitrillion-dollar shortfall nearly as big as Social Security's, a USA TODAY analysis shows."

Federal retirement plans almost as costly as Social Security
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Old 09-30-2011, 06:38 AM   #2
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Looks like the situation with state and local government retirement plans.
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Old 09-30-2011, 07:19 AM   #3
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I find the article hard to believe when it says "The federal government hasn't set aside money or created a revenue source similar to Social Security's payroll tax to help pay for the benefits, so the retirement costs must be paid every year through taxes and borrowing." The dollars they talk about ($7B paid into tax defferred accounts) are Thrift Savings Plan dollars. Those are like any other 401K plan. They exist in reality (unlike the SS Trust Fund) and they have no impact on future spending. They don't even discuss the 1% of employee pay that goes into the pension component of FERS. And, as I remember the discussion, the law established agency payments to fully cover the remainder of FERS. Those payments were to be transferred annually to OPM for the retirement fund. I suspect that if there is a problem with the FERS pension component it is along the lines of the SS trust fund. If excess money goes to OPM it would be spent in other areas and converted to IOUs in the same manner as SS funds.

But then I could be wrong in which case Feds will be paying more and/or getting less in the future. As for us old CSRS retirees and the few still in the pipeline, the Government has long understood that funding issue. No one is proposing to cut current benefits other than tweaks like the alternate COLA formula also proposed for current SS recipients. I'm not losing sleep over that. On funding for military retirement I haven't a clue.
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Old 09-30-2011, 07:22 AM   #4
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Looks like the situation with state and local government retirement plans.
With the significant difference that state and local plans have pension funds (though often underfunded).
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Old 09-30-2011, 07:28 AM   #5
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I find the article hard to believe when it says "The federal government hasn't set aside money or created a revenue source similar to Social Security's payroll tax to help pay for the benefits, so the retirement costs must be paid every year through taxes and borrowing." The dollars they talk about ($7B paid into tax defferred accounts) are Thrift Savings Plan dollars. Those are like any other 401K plan. They exist in reality (unlike the SS Trust Fund) and they have no impact on future spending. They don't even discuss the 1% of employee pay that goes into the pension component of FERS. And, as I remember the discussion, the law established agency payments to fully cover the remainder of FERS. Those payments were to be transferred annually to OPM for the retirement fund. I suspect that if there is a problem with the FERS pension component it is along the lines of the SS trust fund. If excess money goes to OPM it would be spent in other areas and converted to IOUs in the same manner as SS funds.

But then I could be wrong in which case Feds will be paying more and/or getting less in the future. As for us old CSRS retirees and the few still in the pipeline, the Government has long understood that funding issue. No one is proposing to cut current benefits other than tweaks like the alternate COLA formula also proposed for current SS recipients. I'm not losing sleep over that. On funding for military retirement I haven't a clue.
Well, something is out of whack. The article clearly states

Quote:
Private employers are legally required to put money into pension funds to match retirement promises. Private pensions have $2.3 trillion in stocks, bonds, real estate and other assets. State and local governments have $3 trillion in retirement funds. The federal government has nothing set aside.
Where is the money then that you say is in the Thrift Savings Plan? I could see them running a big deficit

Quote:
The retirement programs now have a $5.7 trillion unfunded liability, compared with a $6.5 trillion shortfall for Social Security. An unfunded liability is the difference between a program's projected costs and its projected revenues, both valued in today's dollars.
but there should at least be a mention of some money put aside. I don't know anything about the gov't retirement plan, but either they've been misleading gov't workers about it, or the USA Today article is a bunch of sensationalist crap. I give either option about a 100% chance of being right.
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Old 09-30-2011, 07:51 AM   #6
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Well, it isn't easy to figure out. Googling I found documents about a Postal Service fight to get its contributions lowered because it argued OPM was charging it too much for FERS. I also found the Code of Federal Regs section that governs payments. Regs are difficult to decypher but as I read it, OPM calculates an actuarial cost basis to fully fund FERS obligations along the lines I described and bills agencies. So, to that extent FERS costs are fully funded by agencies. But that doesn't mean that funds are set aside today to pay benefits that will come due tomorrow - just that the rate agencies are paying is sufficient (if continued) to cover the payment stream. So it ultimately requires agencies to be appropriated funds to cover operations included FERS payments. It sounds like what would exist if SS payments (employee and employer) were raised 25% to cover the projected shortfall. I don't see that FERS situation as a crisis but others may.
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Old 09-30-2011, 08:16 AM   #7
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donheff, You are essentially correct. Anyone who has had to budget payroll costs knows that FERS employees are expensive compared to the old system. The agency has to prefund the FERS pension out of current budget. The agency share to fully prefund is determined by OPM (each year I think but I don't remember).

This looks to me like a change where the future employees will face a share of the "current projected" shortfalls instead of all of this going to the agency share. I hope I am wrong because it means that current FERS employees, being the transition, will be hit with the most rapid increases while the earliest FERS retirees like me got a free pass.
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Old 09-30-2011, 08:38 AM   #8
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There is already a proposal to increase employee payment into FERS from its current level to 6 or 8% I think.
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Old 09-30-2011, 09:11 AM   #9
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How much of this is due to FERS and how much of this is the exploding legacy cost of CSRS? To the extent it's CSRS, at least the damage is contained and we won't be adding more fuel to that fire.
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With the significant difference that state and local plans have pension funds (though often underfunded).
And the additional significant difference that state and local governments can't print money.
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Old 09-30-2011, 09:25 AM   #10
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FWIW...
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Old 09-30-2011, 09:56 AM   #11
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FWIW...
USAJOBS - The Federal Government's Official Jobs Site

FWIW - - - Plenty of federal jobs going unfilled, even now, and this has been the case for as long as I can remember. I would encourage anyone to apply who wishes to do so.
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Old 09-30-2011, 10:00 AM   #12
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FWIW...
People can make the argument that those jobs are not comparable, that the fed & state have higher requirements on average.

But the ratios of salary to benefits is interesting.

-ERD50
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Old 09-30-2011, 10:21 AM   #13
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People can make the argument that those jobs are not comparable, that the fed & state have higher requirements on average.

But the ratios of salary to benefits is interesting.

-ERD50
I can't pretend to document how exactly the job mixes differ but I can point to a reason that they would. Since 1980 the Feds have contracted out vast numbers of jobs. Almost all blue collar workers have been shifted to the private sector as well as routine white collar jobs. As an example, when I started at GSA we had 35,000 employees. When I left we had about 13,000. The mission was essentially the same but the missing 22,000 employees were shifted to private sector contracts. The remaining workforce skewed to more costly professional and administrative white collar categories. This happened all over the Federal Government.

That said, I never agreed with the argument that most Feds are underpaid. Pay plus benefits = a nice deal, especially in today's environment.
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Old 09-30-2011, 11:43 AM   #14
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USAJOBS - The Federal Government's Official Jobs Site

FWIW - - - Plenty of federal jobs going unfilled, even now, and this has been the case for as long as I can remember. I would encourage anyone to apply who wishes to do so.

Heck, lots of jobs going unfilled everywhere....

Here is one from BofA (since we have been talking about them in another thread)... and they have more jobs in Houston than the Fed does...

Bank of America | Careers | Overview

I would encourage anyone to apply who wishes to do so.... but your benefits will not be as good the gvmt... to bad....
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Old 09-30-2011, 11:56 AM   #15
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USAJOBS - The Federal Government's Official Jobs Site

FWIW - - - Plenty of federal jobs going unfilled, even now, and this has been the case for as long as I can remember. I would encourage anyone to apply who wishes to do so.
Well, I looked but there's only one job in my area. USAJOBS - Search Jobs

I might be qualified for it, though. It's pretty much what I did while working, and pretty much what I do here every day
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Old 09-30-2011, 12:15 PM   #16
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Well, I looked but there's only one job in my area.
Ah! You mean you might have to lower yourself to actually MOVE for a job in your field?

As I recall there are maybe 20,000 - 30,000 jobs on the usajobs website, many of which are never filled due to lack of qualified applicants. Supply and demand, y'know. They aren't hard to get if you have the qualifications. I applied for only one, which I got, and moved here for the job.
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Old 09-30-2011, 12:52 PM   #17
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I've been retired for 5 years. Thus I have no field. I actually wouldn't mind working for the National Park Service, especially at Assateague Island, but I'm not sure Water and Sewage Control is what I would choose.
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Old 09-30-2011, 12:54 PM   #18
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I've been retired for 5 years. Thus I have no field. I actually wouldn't mind working for the National Park Service, especially at Assateague Island, but I'm not sure Water and Sewage Control is what I would choose.
C'mon harley, you control that every day - at least I hope you do...
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Old 09-30-2011, 01:26 PM   #19
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http://www.whitehouse.gov/sites/defa...t_year/s32.pdf

So here are the sources of the agency share, federal government for regular employees:

OASDIHI 7.65%
FERS 11.9%
TSP 5% of salary match max
Most expensive FEHB plan (2011) $875.29 biweekly (56% of $ 1558.25)

Which gives $42,706 in benefits if the employee maxes out TSP and selects a health plan with the highest cost to the government for a salary of $81,258.

Employee deductions:

OASDIHI 7.65%
FERS 0.8%
TSP 5% of salary to get the 5% match
Most expensive FEHB plan $682.96 biweekly

Gives the employee contribution to benefits of $28,686

(Brief note for anyone confused by the health plan (FEHB) - the number you usually hear for the government share is about 72% but this is an average. Plans above the average are lower than this.)

That's pretty close to the numbers in Midpack's post.

For comparison, the agency and employee cost for CSRS (the old system) is 7% each. There is no OASDI but the HI costs is 1.45% each. There is no TSP match. CSRS pensions are a little less than twice FERS pensions.

The employee share was set to create employee equity between the deductions of CSRS (7+1.45=8.45) and FERS (0.8+7.65=8.45). This is probably becoming less important as the last CSRS employees retire. Essentially you really have a retirement fund and any increases that have been needed have been expressed as agency share for FERS employee increases since this can float and the CSRS agency share is set. So to the extent that shortfalls due to CSRS occur, the agencies have covered these as FERS shortfalls. It didn't matter because the money is really going into the same pot from the same pot - government budgets to government retirement trust fund.

What is confusing to me is how a pension trust fund that operates this way could ever have unfunded liabilities. It could be that the future cost of retiree health care has not been properly accounted for in the prepay. How could the actuaries let that happen?
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Old 09-30-2011, 01:52 PM   #20
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It didn't matter because the money is really going into the same pot from the same pot - government budgets to government retirement trust fund.
I'm having some difficulty following all this. The article claims that there is no "government retirement trust fund" -- are you saying there is one? As I interpret what you've said, the current estimated pension and health payouts for its employees and retirees are included in each department's yearly budget. Is that budgetary allocation what you're calling a "trust fund"?
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