In the 1980s, roughly 120 years after America’s only (so far) civil war, Congress kicked off another less bloody but passionate family feud. What it did was change civil service rules for (then) future hires. While it sounds simple it started a feud that is still going on today.
What happened is that Congress created a new retirement plan for future hires. It is called the Federal Employee Retirement System (FERS).
Workers already on the payroll remained in the Civil Service Retirement System (CSRS) program. The stated idea was to make the federal retirement plan less expensive for taxpayers. And more portable for the majority of federal workers who do not make a full career out of federal service. Things haven’t been the same since.
Even though most still-working feds are under FERS, a few thousand CSRS-covered workers still remain on the job. Most are retired. So you would think…
But no such luck. Decades after FERS replaced CSRS some people, in both systems, insist THEY got the shaft. And are very bitter about being one of the have-nots.
Many FERS workers/retirees envy the more generous formula-based starting annuity (to which they contribute) in CSRS. And the fact that CSRS retirees get full cost-of-living adjustments each January. If inflation exceeds 2%, FERS retirees get a diet-COLA that is one percentage less. Over time that eats into the value of the annuity.
Those under the older CSRS program wish they had earned Social Security coverage (like FERS workers) when they were in government service. And they wish they qualified for a government match (of up to 5%) to their Thrift Savings Plan accounts as do FERS workers.
Many outside observers, who understand how CSRS and FERS operate, say that FERS is generally the better plan for the majority of feds who DO NOT make government their full career. That’s because they can take their 401(k) and Social Security credits with them when they take other jobs. Which most do. For people who spend 25, 30 or 40 years, CSRS with its full COLA, more generous starting annuity and Social Security coverage is best. The CSRS versus FERS feud proves that for lots of people the grass really is greener on the other side.
For those of us covering the federal beat, hardly a week goes by without someone making a complaint about the unfairness of the pension switch. Mostly from workers who came into the FERS program. Last week a reader asked:
“Please address the disparity between the COLA granted to retirees under FERS and those who retired earlier under the CSRS. The discrimination against FERS retirees, a majority now, would not be tolerated if based on gender or racial identify. This unfair treatment is even more painful in these days of high inflation, when even the full COLA amount is not consistent with the high rate of inflation. Thanks so much.” -S.A.
She is talking about January cost of living adjustments for both CSRS and FERS retirees. Those under CSRS — like people who get Social Security payments — get the full inflation rate, as measured by the Labor Department. If inflation exceeds 2%, the diet-COLA kicks in. Meaning that if inflation holds at its current pace, CSRS retirees might get an 8.5 percent COLA while FERS retirees get 7.5 percent. Not much, at first. But over a period of years of high inflation the diet-COLA provision can drastically reduce the spending power of retirees. So what next, if anything? Probably nothing. Most politicians are themselves under the FERS program. And the number of CSRS retiree/voters shrinks every year. So who got the best deal, FERS or CSRS retirees? If so, how so? Most importantly, anybody got a solution?
Nearly Useless Factoid
By David Thornton
The Blue Mosque in Istanbul includes ostrich eggs among its chandeliers to repel spiders and prevent cobwebs.
Source: Istanbul Insider
