A few news nuggets from over the weekend regarding FERS benefits might seem unrelated to each other on the surface, but I believe they are all correlated.
First, a summary of the attacks on FERS:
1) POTUS to recommend jacking federal employee FERS contribution to 2 percent:
POTUS is now echoing the proposals from his opposition party in the House of Representatives. A 2 percent employee contribution to FERS annuity would be more than double the present FERS employee contribution (currently 0.8 percent of salary).
2) (Welcome to Argentina). POTUS recommends capping 401k accounts values at $3M.
For the unitiated, TSP is part of the FERS ‘3 legged stool’ (Social Security, FERS Annuity, TSP), and TSP is the 401k program for Feds. If you think capping your TSP value at $3M doesn’t affect you, think again.
If you contribute $15k (which includes Agency match) per year at an 8% return over your career, your account balance hits $3M after your 37th year. There’s also an infinite number of permutations where your total private/public sector 401k/TSP account balance can hit $3M, especially if you wait to make TSP/401k withdrawals until reaching your RMD (Required Minimum Distribution) age of 70 1/2.
Btw, the fact that POTUS is recommending this $3M 401k account balance cap shows an alarming ignorance of the tax code- There’s already an IRS ‘raid’ on everyone’s 401k/TSP balance when you hit age 70 1/2- It’s called Required Minimum Distributions.
3) Key NARFE member resigns in Federal Pension funding Spat:
I’m not in agreement with NARFE on everything, but I’m with them on this one.
Of the unfunded liability in the Civil Service Retirement and Disability Fund (CSRDF), $741B of the total unfunded CSRDF liability of $761B (or over 97 percent of it) is from CSRS, NOT FERS. I think it’s unfair to slap current FERS employees around because previous Congresses during the eras of the Beatles and BeeGees were too late in reforming/ditching the CSRS Boondoggle system back in 1982.
If you don’t agree with me (that is, you truly believe the CSRDF is insolvent), then riddle me this- Why does each and every Treasury Secretary raid CSRDF as the immediate/knee-jerk action every time Uncle Sam hits the Debt Ceiling?
And finally, the result – 10,000+ Feds pulled the rip-cord in March:
Twice as many feds retired in March than OPM expected. These 10,000+ punch-outs far exceed the ~7,000 who retired during the same month (March) in 2012. 10,000 retirements is a huge number, especially considering the disincentive for FERS feds to retire in 2013. My belief is that enough retirement-eligible employees are fed up with the upcoming furloughs and imminent reductions (a hike in FERS employee contribution/cost is a reduction in benefit) in FERS benefits.
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